Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

MESSAGE FROM THE QUEEN

INCOME TAX

The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Addresses, as follows

I have received your Addresses praying that the Double Taxation Relief (Taxes on Income) (Australia) Order 1980, the Double Taxation Relief (Taxes on Income) (Bangladesh) Order 1980, The Double Taxation Relief (Taxes on Income)(Finland) Order 1980, the Double Taxation Relief (Taxes on Income) (Norway) (No. 1) Order 1980, the Double Taxation Relief (Taxes on Income) (Norway) (No. 2) Order 1980 and the Double Taxation Relief (Taxes on Income) (Sri Lanka) Order 1980 be made in the form of the drafts laid before your House.

I will comply with your request.

I have received your Address praying that on the ratification by the Government of Egypt of the convention set out in the schedule to the draft order entitled the Double Taxation Relief (Taxes on Income) (Egypt) Order 1980, which draft was laid before your House, an order may be made in the form of that draft.

I will comply with your request.

PRIVATE BUSINESS

ISLE OF WIGHT [Lords]

Considered; to be read the Third time.

FALMOUTH CONTAINER TERMINAL BILL(By Order)

Read the Third time and passed.

TYNE AND WEAR BILL [Lords] (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday 22 May.

BRITISH RAILWAYS BILL (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday 15 May.

SOUTH YORKSHIRE BILL [Lords] (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday 22 May.

BANGOR MARKET BILL [Lords] (By Order)

Read a Second time and committed.

PIER AND HARBOUR PROVISIONAL ORDER (BRIGHTON WEST PIER) BILL

Read a Second time and committed.

Oral Answers to Questions — NORTHERN IRELAND

Constitutional Future

Mr. Biggs-Davison: asked the Secretary of State for Northern Ireland if he will make a statement about the future of the constitutional conference.

Mr. Peter Robinson: asked the Secretary of State for Northern Ireland what progress he has made in preparing the White Paper on the future Government of Northern Ireland, arising out of his constitutional conference, now adjourned.

Mr. Michael McNair-Wilson: asked the Secretary of State for Northern Ireland when he expects to publish his consultation document about future possible political institutions for the Province.

Mr. Stanbrook: asked the Secretary of State for Northern Ireland what is the Government's policy as to the constitutional future of Northern Ireland.

Mr. van Straubenzee: asked the Secretary of State for Northern Ireland when he expects to announce his proposals for constitutional advance in Northern Ireland.

The Secretary of State for Northern Ireland (Mr. Humphrey Atkins): The conference on the government of Northern Ireland adjourned at the end of March. In the light of the conference discussions of the Government's working paper and of the proposals put forward by the Northern Ireland political parties themselves, the Government are giving careful consideration to the preparation of their own proposals for transferring to elected representatives of the people of Northern Ireland greater responsibility for the conduct of their own affairs. These proposals will, of course, follow the principles set out by the Government in our working paper—Cmnd. 7763. The Government's proposals will, I hope, be published in the next few weeks, but I cannot yet give the date of publication. When they are published we look forward to the

widest possible discussion, including discussion in this House, if the necessary arrangements can be agreed. As to the conference in Northern Ireland, it will be for the parties concerned to decide how best they can discuss the Government's proposals with us, and whether or not that should be done by re-convening the conference.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call first the five hon. Members whose questions are being answered.

Mr. Biggs-Davison: Failing that agreement between the major political element on a devolved system of government, which my right hon. Friend has been seeking so diligently, will he turn to the improvement of the existing system of administrative devolution, and to the development of local government?

Mr. Atkins: My hon. Friend will remember that one of the options in the working paper was very much what he has in mind. I am bound to tell him that it did not command a great deal of support at the conference table. I stress again that our proposals will be within the principles of the working paper. We shall continue to seek a way forward, which is what all the political parties in Northern Ireland say they want.

Mr. Robinson: Can the Secretary of State be a little more precise as to the timing of the release of his document? Can he say what status that document will have? Will it be a Green Paper or a White Paper? Does not he have a responsibility to recall the conference, as he has already told the House that it has only been adjourned? Can he assure the House that he will make every effort to work in a deliberate and positive manner towards publishing that paper within a matter of days, so that the people of Northern Ireland can be assured that the remarks of some Northern Ireland politicians, to the effect that devolution is dead and will not be resurrected, are not true?

Mr. Atkins: I cannot give the hon. Gentleman a precise date. As I said in my original answer, we are giving careful consideration, which this complex problem undoubtedly deserves, to the way forward. We shall produce the document as soon as may be. As to the conference itself, it stands adjourned. However, it


may well be that we and the parties believe that a reconvening of the conference is the best way forward. If that is so we shall reconvene it.

Mr. Nair-Wilson: As there were no fewer than five different options in the consultation document, can my right hon. Friend say whether it is the Government's intention to distil one proposal or whether it is proposed to reduce the five to one or two options and to hold a further discussion about the best of those possibilities?

Mr. Atkins: Apart from the fact that there were six options rather than five, I must ask my hon. Friend and the House to await the publication of our proposals, which I assure the House will be done as soon as we can. However, I cannot give a date at present.

Mr. van Straubenzee: While not, of course, asking my right hon. Friend to disclose his proposals in advance of publication, does it not remain clear that those proposals will contain effective safeguards in respect of the minority, on the basis that without such safeguards there is no future way forward politically in Northern Ireland?

Mr. Atkins: Yes. That was clearly set out in our working paper. If my hon. Friend will re-read paragraph 5, he will find that that is one of the principles. I am quite clear in my mind that we must adhere to all the principles which are set out there. Indeed, in our discussions so far, I have found it to be generally accepted in Northern Ireland that we should do so.

Mr. Freeson: When the right hon. Gentleman prepares this White Paper—I assume that it will be a White Paper—the contents of which he cannot reveal today—will he take on board the possibility, which many of us would urge upon him, of giving a role to the concept of an all-Ireland council under which there could be the closest possible development of co-operation between the Province and the Republic?

Mr. Atkins: Close co-operation between the Province and the Republic with regard to security and economics already exists. I am not convinced that the introduction of a formalised all-Ireland relationship between the north

and south on political matters would do anything to advance the cause which we are following, namely, to seek to re-establish democratic control of affairs in Northern Ireland by Northern Ireland people.

Mr. Stan Thorne: Will the document embrace the accepted fact that without the emergence of a united Ireland there can be no long-term solution to the problems of Northern Ireland?

Mr. Atkins: Let us be quite clear about what it is that the Government are seeking to do. We are seeking to find ways of restoring to the people of Northern Ireland more control over then-own affairs. We are not seeking to solve the future of Northern Ireland. That is not for us. As I have said, we are seeking to re-establish some democratic way of controlling affairs in Northern Ireland. That is what we are about.

Mr. John: It was no doubt a slip of the tongue, but the Secretary of State implied that the matter would be discussed only in this House if mutually acceptable arrangements could be arrived at. Does he accept that the House must consider the White Paper at the earliest possible opportunity. Is he aware that I would welcome his views as to the order in which it should be discussed? When considering the reconvening of the conference, or whatever further discussions he will undertake in Northern Ireland about the White Paper, will he bear in mind the non-participation of a number of parties and bodies in the previous conference and the difficulty which that caused? Does he also accept that in many cases the hasty way in which that conference was called, and the lack of preparation, led to it being less representative of opinion throughout the whole of Northern Ireland than it should have been?

Mr. Atkins: As to the hon. Gentleman's first point, the words I used were designed to avoid treading on the toes of my right hon. Friend the Leader of the House, whose business this is. Of course, I accept that in general hon. Members feel that an early debate would be a good thing. Like the hon. Gentleman, I regret that the conference was not attended by all the parties which were invited to it, but I am firmly of the


opinion that arrangements for the future government of Northern Ireland affect everyone who lives there. Naturally, it is right and proper to talk to the political leaders in Northern Ireland and I intend to continue doing so. But I want to talk wider than that, and when I used the phrase " the widest possible discussion ", I meant exactly that.

Mr. Fitt: Is the Secretary of State aware of the rumours which are now circulating in Northern Ireland to the effect that the Government will decide on the restoration of Unionist ascendancy, or something called " majority rule ", in Northern Ireland? Taking into account the dangers involved in pursuing that policy, and the fears which would be created among the minority population—particularly in view of the antics of the hon. Member for Antrim, North (Rev. Ian Paisley) in Armagh yesterday afternoon—can he envisage the restoration of any type of government in which the hon. Member for Antrim, North would give fair play to the Northern Ireland minority?

Mr. Atkins: I think that I shall refrain from commenting on a lot of what the hon. Gentleman says, save only to say that I note what his view is. As to rumours, I have discovered during the year in which I have had the honour to hold this office that Northern Ireland is no less prone to rumours than anywhere else—in fact it is rather more so.

Security

Mr. Nicholas Winterton: asked the Secretary of State for Northern Ireland if he will make a statement on the present state of security in the Province.

Mr. McQuade: asked the Secretary of State for Northern Ireland if he will make a statement concerning the security situation in Northern Ireland.

Mr. Trippier: asked the Secretary of State for Northern Ireland if he will make a statement on the security situation in Northern Ireland.

Mr. Humphrey Atkins: Since I last answered questions on 3 April, 41 people have been charged with serious crimes, including four with murder. One of those charged with murder is alleged

to have been involved in the attack on the Ballymena to Belfast train on 17 January in which three people died.
The police are still questioning a number of people arrested on Friday last following an incident in which, I very much regret to have to tell the House, an Army officer was shot dead. In a follow-up operation, four men were arrested and a number of firearms, including an M60 machine gun and a considerable quantity of explosive material, were seized. Hon. Members will be aware that an M60 machine gun has been used in Belfast on a number of occasions in attacks on security forces. The seizure of this weapon is, therefore, particularly significant.
Altogether 38 weapons, 3,788 rounds of ammunition and considerable quantities of bomb-making material have been seized or discovered. The find on 29 April by a UDR patrol near Pomeroy of 900 lbs. of explosive packed into milk churns is a case in point. Those involved in the dangerous work of detecting and disarming this and other bombs are to be congratulated on their bravery and skill.
I regret to say that one member of the RUC, two members of the RUC Reserve, one ex-member of the UDR and one civilian have died at the terrorists' hands as well as the soldier I have already mentioned. Our sympathies go to the families of those killed.
During the course of last month, bomb attacks have damaged four hotels and a number of commercial properties in various towns around the Province, but a considerable number of attacks have been thwarted through vigilance and quick action by both the public at large and the security forces.
During my discussions with Irish Ministers on 15 April, we reviewed the existing arrangements for security cooperation. I am satisfied with the way in which they are operating. Hon. Members will have noticed, for example, the continuing successes of the Irish security forces in discovering arms and explosives caches.

Mr. Winterton: I am grateful to my right hon. Friend for that very detailed and full reply, and I join him in paying full tribute to our security forces in


Northern Ireland. Would not he accept that there is continuing carnage, destruction and loss of life in Northern Ireland, which is an integral part of the United Kingdom?
If the Government of this country, in the persons of the Prime Minister and the Home Secretary, are not prepared to tolerate terrorism on the mainland of the United Kingdom, will they take whatever action is necessary to rout out and destroy the known terrorist cells in Northern Ireland, even if this means using further units of the highly successful SAS, which showed us that terrorism can be defeated?

Mr. Atkins: My hon. Friend will know that the Government remain fully determined to eradicate terrorism from Northern Ireland. He will know also that we are pursuing the policy of doing this within the law. I refer him to the earlier part of my answer, when I told the House that during the last month 41 people have been brought before the courts and charged with serious crimes, including four with murder. This is the way in which we are seeking to suppress terrorism. I am glad to say that the security forces are becoming more and more professional and skilled as the weeks and months go by. I hope, with confidence, that that level of arrests and charges will continue, if not improve.

Mr. McQuade: Will the Secretary of State make a statement about the murder of a member of the SAS? [Interruption.] He was murdered in my constituency, close to where the hon. Member for Belfast West (Mr. Fitt) lives. The members of the IRA, who were surrounded, gave themselves up. What weapons were seized and what charges have resulted from the incident? [Interruption.] I want to know because they came out with a white flag, as usual on the New Lodge Road, close to where the hon. Member lives.

Mr. Atkins: The operation, to which I briefly referred in my original answer, was a very successful one. It is much to be regretted that, when a plain clothes Army patrol investigated a suspicious incident, it was fired upon and one officer was killed. But, thereafter, the security forces acted with extreme efficiency, and I am very happy to tell the House that the incident lasted for only a short time before the terrorists involved, as the hon.

Gentleman said, hung out a white flag and surrendered. They are all in custody and are being questioned, because the police are anxious to determine precisely what charges they should prefer. This was an important capture of both weapons and people, and the security forces are to be congratulated on the way they handled it.

Mr. Trippier: Will my right hon. Friend comment on the statement made by the Provisional IRA yesterday, to the effect that it intends to prevent the repair and future use of the Belfast-Dublin rail link?

Mr. Atkins: The Provisional IRA has claimed responsibility for disrupting the rail link between Belfast and Dublin, and has now threatened—not for the first time—those working and travelling on it. This line is an important public service, of benefit to people of the north and of the south. The action and threats of the Provisional IRA demonstrate once again, if further demonstration were needed, that it cares nothing for ordinary people, north or south of the border, and is merely interested in destruction. Our determination to overcome this threat is quite unshaken.

Mr. McCusker: Bearing in mind the confrontation in my constituency yesterday between certain hon. Members of this House and members of the security forces, can the Secretary of State tell us whether the RUC will arrest anyone on request, or is this a special facility extended only to members of the Democratic Unionist Party?

Mr. Atkins: The Royal Ulster Constabulary decides when to make arrests. But I expect—and I believe that the House expects—that hon. Members should do everything they can to support the forces of law and order, rather than engaging in activities which actively hinder them.

Mr. Kilfedder: Can the right hon. Gentleman say how many innocent people have been murdered in Northern Ireland in the past 12 months since the Secretary of State took office? Does that appalling, unabated slaughter not shame him, either into resignation or taking decisive action to defeat the terrorists, on the basis of what the Prime Minister has already declared, that the Government will not


permit terrorism to exist in this country—or are the Ulster people second-class citizens?

Mr. Atkins: Without notice I cannot give the hon. Gentleman the precise figure of people killed in the last 12 months, but I can tell him that it is too many.
The hon. Gentleman knows that the Government, supported by the whole House, are determined to overcome terrorism. We are embarked upon a particular course and I am convinced that it will be successful.

Mr. Bradford: Will the Secretary of State consult his colleague the Secretary of State for Defence before consenting to certain UDR camp closures in Northern Ireland? Is he aware that many of us in this House believe that the advantages which may result from that action will be seriously outweighed by the disadvantages arising from such closures?

Mr. Atkins: As the hon. Gentleman rightly says, this is primarily a matter for my right hon. Friend the Secretary of State for Defence, but I know of the anxiety, some of which he has expressed to me, as have other hon. Members. I assure him that I am bringing it to the attention of my right hon. Friend. It is the desire of the whole Government that the UDR, which is such a fine body of men and women, should be used to the maximum advantage. That is the whole purpose of any rearrangement we may seek to make. But I take note of what the hon. Gentleman says.

Rev. Ian Paisley: Will the right hon. Gentleman tell the House when he will realise that terrorism in Northern Ireland will never be defeated until there is proper extradition between the Irish Republic and the North of Ireland? Does he realise that, when, these murderers can hide and have safe refuge in the Republic, his forces cannot successfully deal with their attacks across the border? Will the right hon. Gentleman note that the people of Northern Ireland expect him not to enter into friendly relations with the Head of a hostile State which gives sanctuary to these murderers?

Mr. Atkins: I am not as pessimistic as the hon. Gentleman. I believe that we can overcome terrorism, even though the Republic of Ireland does not practise

the same law of extradition as we have in this country
As for not entering into friendly relations with another State, I must tell the hon. Gentleman and the House, that the co-operation between the security forces north and south of the border is, I am credibly informed by people who have longer experience of the Province than I, better than it has ever been. This must be an advantage.

Mr. John: Will the Secretary of State accept from the Opposition that it is the policy of the Government, as it has been of successive Governments, that it is for the police forces, supported by the Army, to bear the main brunt of overcoming the terrorist threat, and that those police forces do not need to be diverted from their main purpose by the irresponsible actions of people in authority?
Will the right hon. Gentleman accept that if people want to persuade the Government of the Republic that a proper system of extradition should obtain, they are hardly likely to do so by acting in a thoroughly irresponsible and discourteous manner to the Irish Prime Minister?

Mr. Atkins: Yes, Sir. I remain convinced that the combined efforts of security forces in Northern Ireland and the Republic can overcome this problem. I am glad that the hon. Gentleman confirms his party's acceptance of the policy which the Government are pursuing; a policy started by the previous Labour Government. I am sure that, in the long run, this is the right way. Each of us has his own way of persuading other people to do things. The hon. Member for Antrim, North (Rev. Ian Paisley) has his way and I have mine. I believe that mine is the better way.

Political Future

Mr. J. Enoch Powell: asked the Secretary of State for Northern Ireland whether, following his recent discussions with members of the Government of the Irish Republic, he will now indicate that he does not intend to resume these discussions so far as they relate to political arrangements and circumstances in Northern Ireland.

Mr. Latham: asked the Secretary of State for Northern Ireland whether he will give an assurance that it is the firm


policy of Her Majesty's Government that ultimate decisions regarding the constitutional future of Northern Ireland will remain the sole prerogative of the United Kingdom Parliament.

Mr. Molyneaux: asked the Secretary of State for Northern Ireland whether he will place in the Library the political analysis which he presented to the Government of the Irish Republic on 15 April.

Rev. Ian Paisley: asked the Secretary of State for Northern Ireland if he will explain the Press communiqué issued after his talks with the Foreign Minister of the Irish Republic; and if he will make a statement.

Mr. Humphrey Atkins: My discussions with Ministers of the Irish Government on 15 April covered matters of mutual interest such as security and the economy. I also explained the Government's policy on transferring responsibilities to locally elected representatives in the Province. The analysis I gave was that contained in the conference working paper—Cmnd. 7763—my speech in this House in the debate on 29 November and in my answers to questions in this House. I am happy to repeat the assurances that I have given before, that decisions on Northern Ireland's future are for the people of Northern Ireland, Her Majesty's Government and Parliament.

Mr. Speaker: I propose to call first the four right hon. and hon. Members whose questions are being answered.

Mr. Powell: Is the right hon. Gentleman aware that there is no reason why the Government of the Irish Republic should not procure and study Green Papers and the Official Report of this House? Will he, in all his contacts with the Irish Government, bear in mind that he is dealing with a State which claims as part of its territory a portion of the United Kingdom? Will he, therefore, be especially careful to avoid, in communiqués or otherwise, language which could give rise to misundertanding?

Mr. Atkins: Yes, Sir.

Mr. Latham: Should it not be clearly understood in Dublin that the current diplomatic initiative and pressure of the Irish Government will, of course, be listened

to politely as befits an EEC partner, but that decisions on this matter are for the people of Northern Ireland as a whole and the elected Parliament of the United Kingdom alone?

Mr. Atkins: I agree with my hon. Friend. We obviously listen to the views of Governments with whom we are in close relationship and who, as my hon. Friend says, are members with us of the EEC—

Mr. Powell: Why?

Mr. Atkins: My hon. Friend is quite right in his last statement. I am prepared to repeat that as often as is necessary.

Mr. Molyneaux: Is the Secretary of State aware that we derive much comfort and satisfaction from the personal assurance given by his right hon. Friend the Prime Minister that the affairs of our part of the United Kingdom are the responsibility of this Parliament and of her Majesty's Government? Will the Secretary of State take effective steps to ensure that there is no impression left in anybody's mind that there has been, or will be, any breach of the undertaking given by the Prime Minister?

Mr. Atkins: I hope to do that. There has not been, and there will not be, any breach of that undertaking. I hope that the fact that I am answering questions on this subject in the House will help. I made it my business when I was in Dublin to repeat the words that I have used this afternoon.

Rev. Ian Paisley: As the joint statement from both parties after the Dublin talks stated that each party outlined the policy in relation to the political situation in Northern Ireland pursued by their respective Governments, will the right hon. Gentleman tell us what outline of policy he stated at those talks? Following his remarks this afternoon may I ask him whether he has entered into an agreement with the Taoiseach that he can come to Northern Ireland as often as he likes and tie up hundreds of members of the security forces in looking after his security?

Mr. Atkins: The hon. Gentleman makes much of the Taoiseach's visit to Northern Ireland yesterday. May I re-Mind him that that was not a unique occasion? The Taoiseach attended the


enthronement of Dr. Armstrong as the Church of Ireland Archbishop of Armagh and Primate of all Ireland. He attended, as I did, at the invitation of Dr. Armstrong. Perhaps the hon. Gentleman will recall that such a thing has happened before. It happened when the Roman Catholic Archbishop of Armagh was enthroned. The then Taoiseach, Mr. Lynch, attended, as did my predecessor. That seems to me perfectly acceptable and proper.

Mr. Soley: Does the Secretary of State agree that, not only are such talks useful, but that they should be uprated to include regular consultations between the Prime Minister and the Prime Minister of Ireland so that we can discuss, among other things, the possibility of Irish unity and get away from this silly idea that any group of people in the United Kingdom—be those people in Northern Ireland, Cornwall or Caithness—can veto a decision made by this House?

Mr. Atkins: Meetings between my right hon. Friend the Prime Minister and the Taoiseach are, of course, a matter for her. Naturally, they meet from time to time about their European business. I have regular meetings—not with the Taoiseach—with the Ministers of Foreign Affairs and Justice in Ireland on matters which are of common interest. Those meetings are of great benefit to both sides.

Mr. Wilkinson: In view of the recent capture of an M60 machine gun—to which my right hon. Friend referred earlier—did my right hon. Friend in his conversations with the Irish Government urge them to initiate diplomatic pressure in the United States to prevent the proceeds from Republican fund-raising activities from being diverted to the procurement of lethal weapons of death such as M60 machine guns?

Mr. Atkins: The details of the discussions which I had—as in the case of all discussions between Governments—are not made public beyond the official communiqué. I think that there is no doubt in the minds of the Governments of the Republic and the United States of our views on this matter.

De Lorean Cars limited

Mr. Cryer: asked the Secretary of State for Northern Ireland if he will

make a statement on the application for financial aid by De Lorean Cars Ltd.

The Under-Secretary of State for Northern Ireland (Mr. Giles Shaw): I have at present nothing to add to the reply which I gave to the hon. Member on 3 April 1980.

Mr. Cryer: Does the Minister accept that we wish to see viable jobs in West Belfast? Will he also accept that a massive chunk of money has been poured into De Lorean Cars but that the taxpayer, having financed the development of the wonder car, does not own it? The rights are in the De Lorean partnership. Will the Minister make it a condition of any further financial assistance—if the car is so marvellous—that we should own it? Will the Minister confirm that no money is being siphoned off, directly or indirectly, into the associated concern CP Trim Limited? I wonder why the Minister refuses to answer questions about that firm?

Mr. Shaw: As the House knows from answers to previous questions on this subject, the De Lorean company is funded in a complicated way, significantly if not exclusively, by the taxpayer through the agency of, as well as directly through, Government grant. I answer the hon. Gentleman by saying that I shall ensure that there will be the fullest possible examination of the application. The CP Trim company has come to West Belfast because of the De Lorean project and will provide additional jobs in an area where we desperately need them.

Mr. Michael McNair-Wilson: Will my hon. Friend say whether the DMC 12 is on target in its timetable? Can he say when he expects the first cars to come off the production line?

Mr. Shaw: I am informed that the car is indeed on its production timetable and we expect limited production to start shortly after the summer. The intention is that the car will be launched in the autumn at the United States Motor Show.

Mr. Pendry: Does the Minister accept that the ravages of inflation are hitting De Lorean severely and that it would appear that its request for additional funds is reasonable in the circumstances


and in line with the criteria of the original agreement?
We urge the Government to make an early decision on payment. Will the Minister consider inviting the hon. Member for Knutsford (Mr. Bruce-Gardyne) and my hon. Friend the Member for Keighley (Mr. Cryer) to visit De Lorean and see the success that it is making of this project?

Mr. Shaw: The hon. Gentleman is correct. The ravages of inflation have affected the forecasts which were made— somewhat speedily—by the previous Administration. It is my duty to see That the ravages of inflation, which afflict every company in Northern Ireland, do not lead to an unduly early decision on additional funding. I can assure the hon. Gentleman that the greatest possible scrutiny will be applied to this application and that the agreement, while allowing an application, does not commit the Government to meeting it.

Mr. Bruce-Gardyne: On a point of order, Mr. Speaker. In view of the fact that the hon. Member for Stalybridge and Hyde (Mr. Pendry) referred to my position on this matter, I should like to give notice that I shall seek to raise the matter again in the House at the earliest possible opportunity.

Mr. Speaker: An optimistic expression.

Convicted Persons (Rights of Appeal)

Mr. Dalyell: asked the Secretary of State for Northern Ireland whether, in his consideration of desirable amendments to the Northern Ireland Emergency Provisions Act,Official Report,

The Minister of State, Northern Ireland Office (Mr. Michael Alison): The Northern Ireland emergency provisions legislation provides a virtually unrestricted right of appeal to the Court of Appeal against conviction or sentence for a scheduled offence before a Diplock court. I am satisfied with the operation of this appellate system and have no proposals for its modification.

Mr. Dalyell: If the Minister is satisfied with the appellate system, how is it that those of us who go from this House on visits to Northern Ireland cannot but sense the deep-seated resentment against the working of Diplock?

Mr. Alison: I think that this is a resentment expressed frequently on behalf of terrorists who have been convicted and do not like the fact that they have been detected and convicted.

Mr. John: Will the Minister undertake to have a look at the report of the European Commission on Human Rights, which has been examining the working of the Northern Ireland (Emergency Provisions) Act, and to make available in a suitable form the Commission's conclusions on the workings of that Act prior to the debate on renewal?

Mr. Alison: Yes, I shall certainly consider most sympathetically the hon. Gentleman's request, and I shall seek to meet it.

Terrorism

Mr. McCusker: asked the Secretary of State for Northern Ireland how many people have been killed through terrorism in Counties Armagh, Tyrone and Fermanagh in the 12-month period 1 May 1979 to 1 May 1980.

Mr. Alison: Twenty-one in Armagh, nine in Tyrone and 11 in Fermanagh.

Mr. McCusker: Does the Minister accept that every one of those deaths represents a body blow to law-abiding communities living in those border areas? Will he confirm that in almost every incident the murderer involved sought sanctuary in the Irish Republic? His right hon. Friend the Secretary of State says that the situation is better than ever, but anything that is an improvement on nil must be better than ever. While we welcome the finds of arms and arms dumps in the Irish Republic, would we not accept the Irish Republic's sincerity even more readily if the people associated with those arms dumps were arrested?

Mr. Alison: I entirely endorse the point that the hon. Gentleman has made about the total unacceptability of even one death from terrorism. I concede also that a number of the terrorists responsible for these appalling murders come across


the border and return across the border. That, in itself, is profoundly troubling, and it is something with which we must try to deal.
I should point out that, looking back over a period of five years, for example, out of a total of 129 murders in this part of the Province, we have succeeded in arresting and charging 42 people for murder. Those charges do not necessarily all relate to murders within that five-year period, and I suspect that there are more arrests and convictions to come. But the fact that these people may go backwards and forwards across the borders gives them no immunity from arrests, charging or imprisonment following conviction.

Mr. John Browne: Following my hon. Friend's answer to the last question, will he, nevertheless, say whether the term " acceptable level of violence " is officially used in his Department? If it is, will he consider the damaging effect that such a phrase used officially has on the morale on the civilian population and on the armed forces serving in Northern Ireland?

Mr. Alison: If any such unacceptable phrase is ever used I confirm that it is totally unacceptable and that we shall do everything possible to expunge and exercise it from any public statement, written or oral, in this context.

Constitutional Future

Mr. Canavan: asked the Secretary of State for Northern Ireland whether he has now come to any conclusions about a form of devolution for Northern Ireland.

Mr. Humphrey Atkins: I refer the hon. Member to the reply I gave earlier today to my hon. Friend the Member for Epping Forest (Mr. Biggs-Davison).

Mr. Canavan: In any devolution proposals will the Government give due consideration to the growing awareness of the need for cross-border co-operation with the Republic of Ireland on matters such as tourism, transport, industry, communications and sport?

Mr. Atkins: Yes, Sir. There are a number of areas, of which the hon. Gentleman has mentioned several, where the interests of people north and south of the border are the same. That is why I believe that it is right to keep in close

touch, as I do, with Ministers in the Government of the Republic, so that we can develop matters of common interest together, rather than in competition with each other.

Mr. Kilfedder: Has the Secretary of State been informed of a recent one-sided broadcast on BBC 2 television, in which a Government politician, a supporter of the present Fianna Fail Government, claimed that a united Ireland was imminent? Will he take action over the question of devolution in Northern Ireland to put an end to the belief held by politicians in the Irish Republic that Ulster will fall into their hands like a ripe plum, because, in fact, the Ulster people will stand on their own if they are pushed out of the United Kingdom?

Mr. Atkins: Happily, I am not responsible for the BBC. I did not see the programme to which the hon. Gentleman refers, in which obviously opinions with which he does not agree with were expressed. I often find that I watch television programmes and hear views with which I do not agree. I do not think that anyone in the United Kingdom or in the Republic of Ireland believes that the unity of Ireland is imminent. The most recent formal expression of opinion which we have had—as little as seven years ago—was the border poll. Every indication that exists today is that the majority of people in Northern Ireland wish to remain part of the United Kingdom. As long as they do, they will.

PRIME MINISTER (ENGAGEMENTS)

Mr. Gordon Wilson: asked the Prime Minister if she will list her official engagements for 8 May.

The Secretary of State for the Home Department (Mr. William Whitelaw): I have been asked to reply.
My right hon. Friend is attending the funeral of President Tito in Belgrade.

Mr. Wilson: I am very grateful to the Home Secretary for answering on behalf of the Prime Minister, who, properly, is attending the funeral. However, has the Home Secretary noticed that President Carter has not deigned to attend the funeral? As it is the duty of an ally to give counsel as well as slavish help, will


the right hon. Gentleman make representations, through the Prime Minister, to President Carter to the effect that it is time that he came out of purdah and, through his new Secretary of State, attempted to enter into discussions with the Soviet Union and other countries to solve the difficult foreign affairs problems that are emerging?

Mr. Whitelaw: President Carter must properly make his own decisions.

Sir Graham Page: Having regard to a High Court judgment yesterday, will my right hon. Friend seek an official engagement today with the Deputy Leader of the Opposition to ask whether the Leader of the Opposition will now withdraw his and his party's support for the so-called day of inaction on 14 May?

Mr. Whitelaw: I have not actually noticed that the Leader of the Opposition's support has been very marked up to now. He has been very silent on this matter. The Deputy Leader of the Opposition, however, has been quite clear. What I should have thought was evident to everyone was that next Wednesday those who wish to go to their jobs have the absolute right to do so. In their interests, for them and their colleagues, for their jobs and this country in the future, I hope that they will decide to do so.

Mr. Foot: Will the right hon. Gentleman take account of the fact that there were two important court decisions yesterday? On the first one, about the day of action, what the judge himself said, whatever views may be held about the particular decision, was that each trade unionist must appreciate that choice to work—[Interruption.]

Mr. Speaker: Order. The right hon. Gentleman must ask a question.

Mr. Foot: I was coming to the question, Mr. Speaker. I was asking whether the right hon. Gentleman was aware of the fact that the judgment that was given by the judge fully supports the choice of any trade unionist or citizen of this country to decide for himself what he shall do on 14 May. Whatever criticisms may be made by Conservative Members on this matter, that is the fact that stands.
Will the right hon. Gentleman also take account of the fact that in the other court judgment yesterday there was, as many of us believe, a verdict given which could involve a very serious infringement of the freedom of the press? Since I should have thought that this is a matter that would fall within the right hon. Gentleman's province, will he take account of that judgment, and if in fact Lord Denning's judgment—[Interruption.]

Mr. Speaker: Order.

Mr. Lawrence: Bring back Healey.

Mr. Foot: If Lord Denning's judgment is upheld—which would be quite a rarity on these occasions—[HON. MEMBERS: " Oh."]. If his judgment is upheld, will the right hon. Gentleman undertake to review the law and bring forward proposals which would forbid any such infringement of the rights or the freedoms of the press?

Mr. Whitelaw: As Home Secretary I have learnt that it is unwise, when I am answering for the Prime Minister, in any way to comment on matters that are still subject to the due process of law. Therefore, I do not intend to do so. I listened to the right hon. Gentleman on the radio. I am sorry that he found it necessary to wriggle about the law as much in the House as he did on the radio. Nothing that he has said invalidates the perfectly proper point that I made about the right of everyone who wishes to go to his or her job on Wednesday to do so.

Mr. Foot: As the right hon. Gentleman is saying, on the second court case, that he does not want to make any comment, why is he so eager to comment on the first case?

Mr. Whitelaw: I did not make a comment. I said that nothing in the judgment invalidated the right of those who wish to go to work to do so. That is the case, and that is what I said.

Mr. Alexander: In the course of the day will my right hon. Friend consider the position of the surviving Iranian terrorist once the due processes of law have taken place? Accepting that there is no extradition treaty between Britain and Iran, does he nevertheless agree that it might be more appropriate to hand the gentleman over to the Iranian authorities—

Mr. Speaker: Order. The case is sub judice. It is not for us to seek to influence the judgment of the courts.

Mr. Jay: What is the right hon. Gentleman advising the unemployed to do next Wednesday?

Mr. Whitelaw: If those who have jobs to go to on Wednesday decide not to go to work, they are likely to put more of their colleagues in the difficult position of the unemployed in future.

Mr. Beith: Does the right hon. Gentleman envisage that large employers, including the nationalised industries, might take action for breach of contract, or inducement to breach of contract, following yesterday's judgment?

Mr. Whitelaw: That must be a matter for them and for the law.

Mr. Stokes: Is my right hon. Friend aware that, since the successful events of last weekend, there has been a great resurgence of patriotism throughout the nation? Is he further aware that although much of that is due to the magnificent actions of the police and the Army, a great deal is also due to the leadership of the Prime Minister?

Mr. Whitelaw: I am grateful for what my hon. Friend says and I agree with him.

OLYMPIC GAMES

Mr. Dalyell: asked the Prime Minister, whether, pursuant to the statement,Official Report,

Mr. Whitelaw: I have been asked to reply.
Our policy is to give help in staging alternative events to the governing bodies of the sports concerned, if that is what their members wish. We have received no specific requests so far, but we expect that any sums involved would be modest.

Mr. Dalyell: That is rather vulgar, petty bribery, is it not?

Mr. Whitelaw: No. I would have thought it thoroughly good sense.

Mrs. Kellett-Bowman: Does my right hon. Friend accept that it is not only the athletes, but in many instances their relatives, who have sacrificed a great deal and are bitterly disappointed about losing their deposits and not going to Moscow? Has he any thought of giving them some modest recompense for doing what is in the national interest?

Mr. Whitelaw: We have made our position clear. We are considering making sums available to the governing bodies of the sports concerned, but we are not considering going any further.

Mr. Roy Hughes: Does the right hon. Gentleman appreciate that these petty recriminations against the Soviet Union serve no useful purpose and can only have the effect of undermining world peace, besides the effect on our athletes, who have trained so assiduously over recent weeks and months to participate in the Olympic Games? Is it not time for the Government to take a more state-manlike approach?

Mr. Whitelaw: To condone the Soviet invasion of Afghanistan would be far more dangerous to world peace than anything else.

Mr. Anthony Grant: Does my right hon. Friend think it rather odd that some athletes and athlete administrators are seeking public money at the same time as they are demanding that politics be kept out of sport?

Mr. Whitelaw: They must answer for themselves.

PRIME MINISTER (ENGAGEMENTS)

Mr. Barry Jones: asked the Prime Minister what are her official engagements for 8 May.

Mr. Whitelaw: I have been asked to reply.
I refer the hon. Member to the reply which I gave earlier today to the hon. Member for Dundee, East (Mr. Wilson).

Mr. Jones: In yesterday's debate, did not two former Conservative Ministers


express serious concern at the Chancellor's policies? What further changes in policy will the right hon. Gentleman recommend to the Prime Minister to avoid rising unemployment and the rising number of young people on the dole?

Mr. Whitelaw: My right hon. and learned Friend the Chancellor of the Exchequer has made his policy perfectly clear. He is sticking to that policy and so are the Government. We believe that we are on course as far as the monetary targets are concerned.

Mr. Cyril D. Townsend: What action will the Government take to protect Libyan nationals living in London and to assuage the fears on both sides of the House that so-called Libyan diplomats have been engaged in intimidation, arson, kidnapping and even murder?

Mr. Whitelaw: When it comes to law-breaking, we have made our position clear. As the House will be aware, three Libyans stand charged with murder. We shall ensure that our law is respected by all those who remain here.

Mr. Charles R. Morris: Will the right hon. Gentleman talk to the Prime Minister when she returns from Belgrade and encourage her to reflect on the problems currently confronting the Lancashire textile industry? Is the right hon. Gentleman aware that, with the closure of one subsidiary of the Carrington-Vyella group in my constituency the other day, only 65,000 jobs remain of the 326,000 jobs that existed in the Lancashire textile industry a few years ago? What is the size of the Lancashire textile industry which the Government are prepared to accept as irreducible?

Mr. Whitelaw: As a Member with a constituency close to the area to which the right hon. Gentleman refers, I understand fully the problems and anxieties that he expresses. I shall refer them to my right hon. Friend the Prime Minister and my right hon. Friend the Secretary of State for Trade.

Mr. Farr: May I ask my right hon. Friend once again to reflect upon the conduct of the Deputy Leader of the Opposition, especially—

Mr. Speaker: Order. That does not come within the Prime Minister's area of responsibility.
Later—

Mr. Farr: On a point of order, Mr. Speaker. I realise that normally the conduct of the Deputy Leader of the Opposition is not the responsibility of my right hon. Friend the Deputy Leader of the Government. However, in this case I wish to call his attention to the fact that some of the—

Mr. Speaker: Order. The hon. Gentleman is about to ask the question that he was going to ask earlier. It is out of order for an hon. Member to ask the Prime Minister to take responsibility for others for whom the Prime Minister is not normally responsible. I have previously ruled that it is wrong to ask the Prime Minister or the acting Prime Minister, to take responsibility for what the Opposition or their spokesmen do. It is out of order to pursue the point.

Mr. Farr: rose—

Mr. Cryer: Name him.

Mr. Speaker: If the hon. Gentleman had to be named for that, there are some people who would never be here.

TUC

Mr. Cryer: asked the Prime Minister when she expects to meet the Trades Union Congress.

Mr. Whitelaw: I have been asked to reply.
I repeat the answer that I gave to the question in the name of the hon. Member for Dundee, East (Mr. Wilson).

Mr. Cryer: The question is when the right hon. Lady is going to meet the TUC and not about her engagements generally.

Mr. Whitelaw: I apologise. My right hon. Friend meets representatives of the TUC at NEDC and on other occasions. Further meetings will be arranged as necessary.

Mr. Cryer: When the right hon. Lady meets the TUC, will it not be true—in view of the savage legal attacks by the Government on trade union rights and the savage attack on the low-paid and the sick by legislation and the Budget—that the TUC will explain that the only way in which trade unionists can protect their rights is by expressing opposition to the savage attack on their standard of


living and by supporting the day of action on 14 May? Does he accept that no judgment at the behest of the Pravda of the Tory Party, the Daily Express, will diminish the rights of trade unionists to support the action on 14 May?

Mr. Whitelaw: To talk about Pravdas of the Tory party is absurd, as I believe that the hon. Gentleman on reflection will agree. The hon. Gentleman talks of savage attacks. I do not accept, and nor do a large number of trade unionists, that these are in any way savage attacks. From what I read recently that is also true of the right hon. Member for Chesterfield (Mr. Varley), who has been leading for the Opposition on this matter.

Mr. Wilkinson: Before my right hon. Friend considers meeting the TUC, will he study reports of the execution this morning of the former Education Minister of Iran, who was the first woman member of Parliament and first Minister in Iran to be executed by firing squad? In view of the outstanding courage of our security forces in defence of the lives of Iranian nationals here, does my right hon. Friend accept that the execution of that woman Minister can only prejudice friendly nations against Iran?

Mr. Whitelaw: I am bound to express anxiety over what has happened, but it would be wrong for me to comment specifically on the action.

BUSINESS OF THE HOUSE

Mr. Foot: Will the Leader of the House state the business for next week?

The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): The business for next week will be as follows: 
MONDAY 12 MAY— Consideration of private Members' motions until 7 pm.
Second Reading of the Iran (Temporary Powers) Bill.
TUESDAY 13 MAY —Remaining stages of the Iran (Temporary Powers) Bill.
WEDNESDAY 14 MAY —Proceedings on the Gas Bill and on the Sea Fish Industry Bill.

Motion on the Criminal Justice (Northern Ireland) Order.

THURSDAY 15 MAY—Progress on the Health Services Bill, until about 7 pm, followed by a debate on the appointment of the British Steel Corporation chairman, which will arise on a motion for the Adjournment of the House.

Afterwards, motion on the Iron and Steel (Borrowing Powers) Order.

FRIDAY 16 MAY—Debate on a motion to take note of the BL 1980 corporate plan.

MONDAY 19 MAY— Progress on remaining stages of the Housing Bill.

Mr. Foot: I thank the right hon. Gentleman for the arrangement for next Thursday, in respect of the debate on the appointment of the chairman of British Steel, which we requested last week. I am grateful to him for acknowledging our request.
We should have preferred to debate the business for Friday on another day. We appreciate the difficulties, and it is possible that the day cannot be changed. I understand the pressures, but will the right hon. Gentleman consider that request?

Mr. St. John-Stevas: I am grateful to the right hon. Gentleman for his remarks. As he knows, there were difficulties in finding suitable business for a Government Friday. It is not ideal to have the British Leyland debate on that day, but


it was the best of the alternatives that were discussed through the usual channels.

Mr. Adley: Will my right hon. Friend ask whoever is speaking for the Government on Monday not to take the line that we believe in sanctions for their own sake, or that they are necessarily workable or in Western interests, but that the sole objective is to protect what we believe are the interests of the Western Alliance, and in particular those of the United States?

Mr. St. John-Stevas: It is not for me, as Leader of the House, to instruct Ministers on their speeches, although it is an interesting idea, which I shall consider. I am sure that my hon. Friend the Minister of State, Foreign and Commonwealth Office will note the cogent advice advanced to him by my hon. Friend.

Mr. Hefter: Will the right hon. Gentleman indicate whether Monday's debate on the Second Reading of the Iran (Temporary Powers) Bill will finish at 10 pm or later? Is the right hon. Gentleman aware that on the basis of the feelings of my hon. Friends it is unlikely to finish at 10 pm? If the debate is not concluded by a reasonable time on the following day, what proposals are there for a further day?

Mr. St. John-Stevas: With regard to the hon. Gentleman's second point, I am hopeful that by having the half-day on 12 May and a full day in prime time on 13 May the proceedings will be concluded at a reasonable hour. With regard to the hon. Gentleman's first point, it is the Government's intention to table a motion suspending the rule for two hours so that the vote will take place at midnight.

Mr. Kenneth Lewis: Is it by accident or design that my right hon. Friend has arranged that on 14 May, when the TUC will be speaking in Trafalgar Square, we shall be discussing the Gas Bill? Has my right hon. Friend made special arrangements for staff and others to get to and from Westminster on that day?

Mr. St. John-Stevas: We are hopeful that our proceedings will not be affected by whatever else happens on 14 May. With regard to the choice of proceedings on the Gas Bill, my hon. Friend asked whether it was by accident or design that

that debate was selected. It was on both those grounds.

Mr. Greville Janner: In view of the blatant abuse of the law and practice of diplomatic immunity that has been thrown into sharp relief in the past week by the contrast in the handling of the Iranian siege here and the continued holding of American hostages in Iran, combined with the terror on our streets that it is alleged emanates from certain embassies, do the Government propose to consider the problems of diplomatic immunity and make a statement or have an inquiry and debate on the proposed changes?

Mr. St. John-Stevas: My right hon. and noble Friend the Foreign Secretary is looking closely at the important issues involved. No doubt he will come to a conclusion in due course.

Mr. Latham: May we have a statement next week from the Foreign Office on the status of the Libyan embassy, and in particular on the question whether it has been made clear to Colonel Gaddafi that we cannot tolerate so-called diplomats, the policy of whose country is to murder its citizens on British soil?

Mr. St. John-Stevas: Without attributing the answer to any country, it is the policy of Her Majesty's Government to condemn any such attitude. With regard to a statement by the Lord Privy Seal or the Foreign Secretary in another place, that would depend on developments.

Mr. Dalyell: Did the Leader of the House have any messages about the instructive debate that we had last night on Southern Rhodesian sanctions? Does he agree that it would be for convenience all round if, at the time that we are discussing Iranian sanctions, we brought in legislation for an Iranian sanctions amnesty order?

Mr. St. John-Stevas: I followed with interest the proceedings last night. I must point out that although there are some superficial resemblances in the two situations, a deeper examination shows that they are entirely distinct.

Mr. Peter Bortomley: Will my right hon. Friend reconsider the business planned for next Friday? Would it not be more suitable for the House to have a proper opportunity to debate in advance


the total confusion in the trade union movement about the intentions of the planned day of action on 14 May? Would this not give us an opportunity to hear from the leader of the Labour Party his view of the trade unions trying to dragoon their members into a political strike that is not welcomed by nearly all those members?

Mr. St. John-Stevas: I would welcome a breach of the Leader of the Opposition's Trappist vow of silence. On the question of changing the business on Friday, however, I believe that this would be moving out of the frying pan into the fire.

Mr. Shore: In view of General Gaddafi's utterly disgraceful statement and threat to Libyan nationals in other countries, including our own, may I press the demands that have already been made for an early statement by a Foreign Office Minister on this matter?

Mr. St. John-Stevas: I shall certainly pass that request to the Lord Privy Seal and the Foreign Secretary.

Mr. Nicholas Winterten: My right hon. Friend will have heard the question put to the acting Prime Minister today by the right hon. Member for Manchester, Openshaw (Mr. Morris) about the textile industry. No doubt he will also have noted that there has been an unsuccessful Standing Order No. 9 application on the state of the industry. Bearing in mind the parlous problems facing the industry, through no fault of its own, will my right hon. Friend arrange for an early debate next week? This is an industry in which, in Lancashire alone, last week there were eight mill closures involving 3,500 people.

Mr. St. John-Stevas: We are extremely concerned about the textile industry. There was a debate on 21 April on this industry—

Mr. Winterton: That debate was on the North-West.

Mr. St. John-Stevas: Yes, it was on the North-West, but it involved the textile industry. I cannot promise an early debate in Government time, but there may be other opportunities for this.

Mr. James Hamilton: When will the Whitsun Adjournment debate take place?

Will the Leader of the House also tell us what progress he has made in relation to the Summer Recess, bearing in mind that school holidays are earlier in Scotland than in England and Wales? When does he intend to adjourn the House to enable Scottish Members to have some time with their wives and families during the holiday period?

Mr. St. John-Stevas: We shall have the Whitsun Adjournment debate on Wednesday 14 May. While I am sympathetic to the needs of Scottish Members, I cannot give any guarantees about the date on which the House will rise for the Summer Recess. That depends on a number of factors that are not in my control. I hope that we shall rise at a reasonable time, but we have not reached the Whitsun Recess yet. Let us get over that before we start considering the Summer Recess.

Mr. Alan Clark: As the debate on Iranian sanctions is clearly a charade to placate the ruffled feelings of the Americans, will my right hon. Friend ensure that appropriate invitations are extended to the United States ambassador and his acolytes to attend that debate?

Mr. St. John-Stevas: The Distinguished Strangers' Gallery is always open to the ambassadors of countries that are represented at the Court of St. James. My hon. Friend is going too far when he refers to this matter as a charade. I draw his attention to the fact that it is vital in foreign policy that when the leader of the Western Alliance is facing difficulties, this country should be seen to support the United States.

Mr. Winnick: However deplorable the holding of American hostages may be, is the Leader of the House aware that it is extremely unwise to bring in a sanctions order next week, since it will obviously serve no purpose whatsoever, and will not secure the release of a single American hostage?

Mr. St. John-Stevas: That is a matter for debate, not when the order is introduced—because we do not intend to introduce an order—but when the Bill is introduced next week. I suggest that the hon. Member should reserve his comments until he sees the contents of the Bill, which has not yet been published.

Mr. Neil Thorne: Has my right hon. Friend noticed early-day motion 548, on pharmacists' remuneration?
[That this House calls for the implementation of the Franks Report and, in particular, the establishment of some form of permanent review machinery for settling the remuneraton of pharmacists]
In view of the widespread support for that motion, and the fact that the matter has not been debated since the middle of 1978, will my right hon. Friend allow time for discussing this forgotton profession?

Mr. St. John-Stevas: This is an extremely important question, referring to the Franks report and the establishment of a permanent review machinery for settling the remuneration of pharmacists. My right hon. Friend hopes to be able to announce a decision on this matter shortly.

Mr. Gregor MacKenzie: Do the Government intend to make a response to the Finniston report on the engineering industry? If so, when can we debate the matter?

Mr. St. John-Stevas: Discussions are still continuing, and I hope, that the Government will soon be in a position to make a statement on this most important report within a reasonable time.

Mr. Marlow: When considering the scheduling of the Iran Bill next week, will my right hon. Friend bear in mind that many Members on the Government Benches believe that the United States' perception of and interests in the Middle East are quite different from those of the United Kingdom? Does he agree that there is at least a possibility that the introduction of the Bill will be damaging to our interests in the Middle East, and therefore damaging to the Western Alliance as a whole?

Mr. St. John-Stevas: This is an agreement of the nine member countries of the EEC to act in concert in this regard. We have entered into this agreement, and the introduction of the Bill next week and its publication today are in fulfilment of that obligation, freely entered into.

Mr. loan Evans: Before the House debates the appointment of the British

Steel Corporation chairman next week, will it be possible for the Government to place in the Library and the Vote Office the details of the appointment, so that we can see the details of the Government's payment of £2 million to Lazard's? Some of us have difficulty in explaining to steel workers why the Government did not have any money to pay them more than 2 per cent.

Mr. St. John-Stevas: That point would be more properly raised in the debate itself, and discussed with my right hon. Friend the Secretary of State for Industry.

Mr. Lee: Given that a considerable amount of shoe leather will be used up on the rather pointless marches of 14 May, would it not be more appropriate if we had a debate on that day on the serious state of the British footwear industry? Perhaps out of that day of action some good may come to at least one section of British industry.

Mr. St. John-Stevas: I only regret that that helpful suggestion was not made earlier, when we might have discussed it through the usual channels.

Mr. Foulkes: Can the Leader of the House give an indication when he expects to report progress on the all-party talks on the government of Scotland?

Mr. St. John-Stevas: Those talks are proceeding. They have made reasonable advances in the area of improving procedures in this House. I hope that within a reasonably short time we shall reach a constructive conclusion.

Mr. Burden: Is my right hon. Friend aware that many of us remember a certain stage of the last war when this country would have undoubtedly soon gone under, because we were bankrupt and we could not provide ourselves with weapons or food, and the Americans came to our aid? Is it not right that we should support America now over Iran?

Mr. St. John-Stevas: I agree entirely. Underlying my hon. Friend's remarks is the important principle that the whole security of the Western world depends on maintenance of the alliance with the United States.

Several Hon. Members: Several Hon. Membersrose—

Mr. Speaker: Order. I propose to call those hon. Members who have been rising throughout.

Mr. Cryer: Will the Leader of the House consider withdrawing the Iranian sanctions Bill, particularly after the debacle of the amnesty order last night? Does he not think that there should be a general debate on foreign affairs rather than the Bill, so that we can discuss our whole foreign policy, which seems at the moment to be totally subordinated and servilely subjugated to American foreign policy over a wide range of issues, such as cruise missiles and Iran, which can pull us towards a third world war without any sort of independent view being expressed by the House or the country?

Mr. St. John-Stevas: I agree with the hon. Gentleman that the world situation is fraught with danger. I would like to see a debate, in due course, on foreign affairs in general. Subject to Mr. Speaker's ruling, there will be an opportunity to consider the world situation as a background to the introduction of this Bill. As to withdrawing the Bill, this is a somewhat metaphysical point. One cannot withdraw a Bill before it has been introduced.

Mr. Frank Allaun: With regard to the Iranian sanctions debate, do the Government intend to have a free vote on their side of the House?

Mr. St. John-Stevas: I understand that there is to be a free vote on the Opposition side of the House. I fully understand the reasons. Those reasons are not operative on the Government side of the House. A mild form of Whip will be imposed.

Mr. Andrew F. Bennett: Is the Leader of the House aware that the Register of Members' Interests, on the Table in front of him, is the 1976 edition? When will he find time for a proper debate on the register, to consider whether we can officially use the 1980 edition?

Mr. St. John-Stevas: I have held discussions on this point with the Chairman of the relevant Committee. I understand that the current register is available for consultation in the Library.

Mr. Flannery: In view of the major defeats suffered by the Conservative

Party in the recent local elections and the consequential good effects on comprehensive education that changes of councils towards Labour will bring about, will there be an early debate on education?

Mr. St. John-Stevas: I understand the hon. Gentleman's disappointment over the result of the local elections. I am afraid that I cannot assuage that by promising an early debate on education.

Mr. Straw: Is the Leader of the House aware that the textile industry requires not vacuous expressions of concern and sympathy but positive Government action to repair the damage done to the industry by Government policies? When do the Government intend to ensure that the Secretary of State for Trade will present to the House a package to save the industry? When will the Government arrange for a debate on the industry? During this Session there has been no debate on the plight of the Lancashire textile industry.

Mr. St. John-Stevas: The Government have made clear their concern for the industry and have also taken practical steps in supporting the multi-fibre arrangement and in the preparations that are being made to ensure a reasonable degree of protection in the future. That is the immediate answer to the hon. Gentleman.

QUESTIONS TO MINISTERS

Mr. Speaker: I undertook yesterday to look into the submission made to me by the hon. Member for West Lothian (Mr. Dalyell), about the acceptance by the Table Office of a question of his relating to the Cambodian relief operation. I am satisfied that the question was properly received. I should add, however, that I do not propose in future to respond in the House to points of order relating to the acceptance of individual questions. Such matters should be pursued through the normal procedure that applies to submissions to me in connection with decisions of the Table Office with regard to questions.

Mr. Dalyell: I thank you very much, Mr. Speaker, and the Clerks of the Table Office, for the amount of time and thought given to this matter. It is hoped that the issue can be raised,


possible on the Adjournment of the House next Wednesday, when it can be properly discussed.

Mr. Cryer: I take it, Mr. Speaker, that your statement does not mean that if there is a clash between an hon. Member and the Table Office, after representations have been made to you, hon. Members will be prevented from raising the matter on the Floor of the House. That is often a way in which matters can be resolved.

Mr. Speaker: I am afraid that is just what I was saying. A procedure is followed in connection with the Table Office. If hon. Members are not satisfied, they appeal to me. I look into the matter. Sometimes I reverse the decision of the Table Office and sometimes I do not. I shall not say on which side I come down most often. It must then be the end of the matter.

EUROPEAN COMMUNITY (AGRICULTURE MINISTERS' MEETING)

The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker): With permission, Mr. Speaker, I should like to make a statement about the meeting of the Council of Ministers in Brussels on 6–7 May at which I represented the United Kingdom together with my hon. Friend the Minister of State.
I confirmed to the Council the Government's opposition to the price increases that were discussed at Luxembourg and agreed to by the other eight countries, and opposed the level of price increases of the order of 5 per cent. that were being proposed on the various commodities that were discussed at this Council meeting.
I made clear our strong objections to the proposals that the Commission had produced at Luxembourg on mutton and lamb and demanded that these proposals should be examined by the Special Committee in order to expose the many problems that would arise if they were adopted. I obtained agreement that this should be done and further discussions on mutton and lamb will only take place after the Special Committee has reported.
I resisted a suggestion from the Commission that the Council should agree to adopt immediately a regulation applying a common classification system to beef. It was accepted that there should be further detailed technical discussions before a decision is taken in time for the beginning of the 1981–82 marketing year.
I also pressed for the package of measures to include a commitment that the refunds of levies on imported cereals used in the production of spirit drinks, mainly whisky, would be paid. Although provided for in the Treaty of Accession, this has still not been implemented after a lapse of eight years. I said that I could not accept any further delay. I obtained a Council commitment to adopt a regulation this year providing for the refunds to be paid. These payments will be of substantial benefit to the whisky industry.
The Council agreed to a request from the French and Italian Governments for devaluations in their green currency rates


of 1·3 per cent. in the case of France and 3·5 per cent. in the case of Italy.
The Council will resume its discussions on the CAP prices package and other items upon which, as yet, there is no agreement on 28 May. At the same time, it is probably expected there will be a meeting of the Council of the Foreign Ministers at which the budget question will be discussed.

Mr. Mason: I thank the right hon. Gentleman for that statement, but I hope that he manages to succeed in rectifying the unfair levy burden placed on the Scotch whisky industry ever since we entered the Common Market. The industry has to purchase dear Common Market barley, which has blunted its competitive edge in selling abroad.
What details of the farm package have so far been agreed? Is the butter subsidy to continue? What is to happen to the beef premium? Does the right hon. Gentleman anticipate any cuts in sugar quotas during this year? Does he still stand by his promise to the House that he will not agree to any price increase on products in structural surplus and that he will not agree to a sheep-meat regime that necessitates intervention and United Kingdom costs?
While recognising that the right hon. Gentleman has so far resisted the demand by the other eight Ministers for a 5 per cent. rise in average prices, in spite of the Commission's proposal that they should not rise above 2·4 per cent., may I ask him whether he is aware that even if the Prime Minister succeeds in cutting the budget deficit by £800 million and he then gives way on a 5 per cent. increase—there are clear indications that he will—our food bill will rise by about £300 million? Is he further aware that the greater the price increase the more the consumer bears the brunt and the more he undermines what the Prime Minister might achieve?
If the right hon. Gentleman also agrees to an increased co-responsibility levy on milk, which means that the United Kingdom consumer will have to pay more, and a contribution to a sheepmeat regime, which will mean increased lamb prices in the United Kingdom, the Prime Minister's deal, in the end, will look pretty sick, as will the British consumer. What assurances can the right hon. Gentleman

give that in the final round on 28 May none of these three things will happen—that he will not agree to a 5 per cent. increase in prices, or a co-responsibility increase in milk, or a sheep-meat regime with United Kingdom costs?

Mr. Walker: Those comments from a member of the previous Government, which had an average price increase of 7½ per cent. and never obtained a deal on the budget, are remarkable. Even if we agreed a 5 per cent. increase, it would be much lower than the average increase under the previous Government.
If the right hon. Gentleman reads my statement, he will see that we have obtained agreement to the whisky rebate, which is something that we failed to do during the five years of the previous Government. That will be of considerable benefit to the whisky industry. After many years of failure, a firm commitment has been made to that.
There is no agreement on any part of the package. We have a reserve over the whole of it. The package agreed by the eight other countries includes the whole of our butter subsidy—twice what the previous Government achieved—the beef premium scheme and a continuation of our sugar quotas.

Mr. Geraint Howells: Is the right hon. Gentleman aware that I admire his stand in Europe and I do not believe that he should go for a 5 per cent. increase across the board? However, I am sure that he will agree that if British agriculture is to survive, it will need the extra 5 per cent. during the coming year. Will he assure the House that he will not abolish the present guaranteed efficiency payments on sheepmeat or trade them in for a similar scheme that will benefit the French? Can he also tell us when the review on marginal land will be announced?

Mr. Walker: The review is taking place. We are studying methods of speeding up the possible classification of marginal land. We should certainly oppose any sheepmeat regime that replaced the present system and gave fewer safeguards to our sheep producers. The present system has helped and is operating well in difficult market conditions. If there are to be changes, we shall want something that is as good, if not better, for our producers.
It is true that farm incomes have dropped substantially in real terms over the past two years and input costs are increasing substantially. A range of methods of assistance is available to us and the Government have used some, including green pound devaluations and increases in the hill farm subsidies. Those are ways in which we can try to help to maintain farm incomes. Obviously, at a time of substantial increases in input costs, there is considerable pressure on farm incomes.

Mr. Jim Spicer: In all the pressure that the other eight member countries are bringing for increased prices, do they ever take account of the increasing imbalance which will result and the near bankruptcy that the Community already faces, which is bound to get worse if we continue along that path?

Mr. Walker: If the present package is agreed, we shall come close to the 1 per cent. VAT limit, which would mean that an even greater proportion of the European budget was devoted to agriculture. As I have said before, in terms of European policies that would be a fundamental mistake when there are so many other things to be done in Europe.

Mr. J. Enoch Powell: Is the right hon. Gentleman aware that his resolute and abrasive stance at the Council will be highly to the satisfaction of the great majority of his fellow countrymen? Will he confirm that the reference at the conclusion of his statement to the simultaneous meetings on 28 May in no way derogates from the statement of the Prime Minister that a settlement of the budget question to her entire satisfaction is the condition precedent to agreement on other matters?

Mr. Walker: Yes.

Mr. Sims: Is my right hon. Friend aware that the scotch whisky industry is appreciative of his persistent efforts to obtain the restitution payments due to the industry? May I congratulate him on the success of his endeavours? Can he confirm that the commitment that he has obtained covers not only payments that are currently due but those that have accumulated over the past eight years?

Mr. Walker: Yes. Our interpretation of the treaty is that the arrangement was applicable to us from 1 January 1973. With the changes that have taken place in grain prices over that period, it is a substantial benefit, currently about £20 million a year.

Mr. Jay: Can the hon. Gentleman confirm or deny reports that the Commission proposes to resume full-scale exports of subsidised butter to the Soviet Union? Why cannot the British Government veto that indefensible subsidy?

Mr. Walker: The reason why the power of veto does not exist is that under previous Governments the policy was agreed and, as a matter of policy, is in the hands of the management committee. It could be taken away if the majority of countries agreed. But they do not. The British Government think that to continue that form of trade, with British and European taxpayers subsidising unwanted surpluses to benefit the economy of the Soviet Union, is a tragic blunder.

Mr. Peter Mills: Does my right hon. Friend agree that if farm costs increase by 15 per cent. and we wish to maintain production, British agriculture must have an increase in its end prices? Will he try to explain why the Opposition accept that other industries can recover their costs but are opposed to British agriculture doing so?

Mr. Walker: In fairness to the record of the Labour Party in government, I should say that it successively obtained substantial price increases in every CAP review. It is only in opposition that Labour Members go in for their present policy. It is true that there are substantial increases in input costs. The rise in oil prices has massively affected the price of fertilisers and farm workers had their biggest ever pay increase last year. Those are substantial input costs and it is the duty of the Government to find ways of ensuring that agriculture continues to expand and invest despite those input costs.

Mr. Spearing: Is the right hon. Gentleman telling us that there are to be rebates on imported grain for whisky but not for bread? Will he confirm that the levy is about £50 to £60 a ton on feed grains for cattle and for making bread? Those corn laws have been with us since


1973 and is it not reasonable that the right hon. Gentleman's party should, as it did 100 years ago, get rid of those corn laws by getting rid of the Treaty of Accession?

Mr. Walker: The refunds on whisky relate to re-exports. If we start re-exporting bread, I shall certainly claim the refunds.

Mr. Colin Shepherd: Does my right hon. Friend agree that no other industry in this country has had a price increase of only 6 to 8 per cent. in the past two years? Will he confirm that the continued reluctance of the French to permit the import of lamb from England is not forming part of the negotiations at this stage?

Mr. Walker: I regret that the Commission put forward, not with the support but with the silence of a number of other member States, a programme for sheep which is unworkable, will probably result in 100,000 tons of sheepmeat going into intervention, will violate third country markets and do a great deal of damage here and overseas. It is a crazy scheme. At the last Council meeting, I pointed out in detail the absurd weaknesses of the scheme, which resulted in its being referred back to the Special Committee. I hope that as the Commission is forced to look at it in greater depth it will realise the folly of its ways.
In Europe as a whole, the price increase last year was 1½ per cent. The increase proposed by the other eight member countries this year is 5 per cent., which would give a total of 6½ per cent. over two years—much lower than the rate of price increase of almost any other product in Europe. However, there are other factors, particularly in the United Kingdom, that have enabled us to obtain increases—due to the green pound devaluations and improvement of hill sheep subsidies—that have partly compensated for that situation.

Mr. Dalyell: Will the Minister say what is the position on ethyl alcohol?

Mr. Walker: That matter was not discussed.

Mr. Dalyell: Why not?

Mr. Speaker: Order. Second supplementary questions are not allowed.

Mr. Hicks: Will my right hon. Friend say what the additional cost to the EEC agricultural budget would be as a result of the tentative agreement reached by the other eight countries? Within the context of that provisional figure will the United Kingdom be a net contributor or beneficiary?

Mr. Walker: As to the overall cost, obviously I do not know the final calculations of those aspects of the package that were discussed yesterday, some of which must still be costed. As to the Luxembourg package—the main items—it was suggested that the overall increase would be about 1,000 million units of account, of which the United Kingdom would obtain a share of the benefits. However, I hope that whatever agreement is reached—in the same way as last year, when the United Kingdom was a net beneficiary for the first time—this year we shall again end up as a net beneficiary.

Several Hon. Members: Several Hon. Membersrose—

Mr. Speaker: I shall call those hon. Members who have been rising in their places.

Mr. Harry Ewing: Why was not the ethyl alcohol question discussed if the Minister discussed the whisky industry? Surely he realises that the ethyl alcohol problem is related to the whisky industry. Is the Minister merely hoping that the problem will go away?

Mr. Walker: No. The ethyl alcohol position is discussed under the alcohol regime. I discussed the whisky aspect under the cereal regime. I was unable to discuss this point under that item. The agenda at the moment is totally connected with price fixing. It is fixed by the Council, not by any member State, and therefore it was not discussed on this occasion.

Mr. Brotherton: Will my right hon. Friend say what he means by " sheep-meat "? Does he mean lamb and mutton? If he does, will he ensure that he defends the interests of our lamb and mutton farmers?

Mr. Walker: Yes. I mean lamb and mutton, although I discover that in this country basically all mutton is now called lamb. Obviously I give the assurance for which my hon. Friend asked.

Mr. Hardy: Did the right hon. Gentleman make it clear that he was determined that our apple and pear industry would survive? Can we expect during 1980 an end to the present absurd coefficiency method of calculation? Does the right hon. Gentleman believe that 1980 will see action taken in the autumn of this year to restrict the flow of Golden Delicious applies from France?

Mr. Walker: I do not think that the correct policy is one of restricting the flow if the flow is coming on perfectly reasonable and equal terms. If it is not, one should deal with any unfairness in that regime—which we shall deal with. There is a great deal of scope for improving the marketing, grading and production of British apples and pears. I shall make some announcements in the coming week concerning that industry which I hope will be of help. I hope that we shall start the French worrying about exports of Cox's and Bramleys to France rather than the other way round.

Mr. Marlow: Does my right hon. Friend agree with me and the majority of people in this country that the common agricultural policy is damaging to the economy of Britain, to British agriculture and, in particular, to the housewife? Will he ensure that the housewife continues to have access to traditional supplies of butter and sheepmeat, including lamb, produced at a fraction of the cost of that produced in the Common Market, which comes from New Zealand? If the CAP is not reformed by the EEC, which is unlikely, given the vested interests of many EEC countries, will he ensure that he seeks either to foist the cost of the common agricultural policy on to those countries that benefit from it or to disengage from it?

Mr. Walker: As the CAP consists of over 70 per cent. of the budget, in obtaining a proper and fairer adjustment of the budget we would be putting the cost of the agricultural budget much more upon those who benefit from it instead of those of us who do not obtain the same kind of benefit. The argument about the budget is very much concerned with the fair distribution of costs of the CAP.
As to the effect of future supplies on the position of New Zealand, the community,

including France, agreed within the GATT that sheepmeat should come from New Zealand with a 20 per cent. tariff and should thereafter have free access. There is no way that the British Government and, I am glad to say, virtually all the other member States would agree to any change in that position.

Mr. Parry: Will the Minister give an assurance that at future meetings of the Council of Ministers he will oppose any proposals by the EEC to introduce a tax on vegetable oils and fats? Would not such a proposal lead to further unemployment in the United Kingdom, especially on Merseyside and the North-West?

Mr. Walker: I totally agree with the hon. Gentleman. There is a group of Ministers who would like to see this industry put at a handicap because of the surpluses of butter. That would be a totally disastrous and wrong policy and certainly I should oppose it.

Mr. Nicholas Winterton: Does my right hon. Friend accept that these annual EEC price negotiations seem to become more difficult each year? Is he further aware that the delay in announcing the price agreements is very damaging to British farming? Is he aware that there remains doubt and concern in the minds of the dairy industry that he may be forced to accept an increase in the co-responsibility levy? Despite his assurance that he will not accept it, will he repeat the assurances given on previous occasions?

Mr. Walker: What I said about the co-responsibility levy was that I was against any form of exemption that resulted in creating a position that was adversely affecting the position of the United Kingdom dairy farmer. The current proposals contain a proposal for a price increase of 4·1 per cent., with a flat rate co-responsibility levy, but with very minor exceptions, of 2 per cent. I should much prefer no price increase and no levy, but that is the current proposal put forward by the Eight.
As to the duration of price fixing, no one is more opposed to the duration of the discussions than I am.

Mr. George Grant: Will the Minister give an assurance that he will continue to resist resolutely any increase in commodities


that are in surplus? I understand his approach and the need to be flexible in this round, but does he agree that the continued featherbedding of commodities in surplus must be the economics of the madhouse?

Mr. Walker: Yes. However, I must point this out. Last year we were the first Government to succeed in getting a price freeze on milk. The previous year there was only a small increase in the price of milk. The result is a substantial increase in milk production in Europe. One of the impacts and effects, if we are not careful—which is the immediate effect that has occurred—is that small farmers take on an extra cow to retain the same income. Therefore, we do not necessarily solve the problem of the surplus. However, in principle we stated our policy, which is that we think it is foolish to increase the prices of the goods in surplus.

Mr. Strang: As support for milk alone cost almost £3,000 million last year—almost 40 per cent. of the total CAP budget—does the right hon. Gentleman agree that it is crucial for him to stand by his commitment to this House to a freeze on the common price of milk? Will he undertake to maintain the same resolute opposition as did the Labour Government, and as he did last year, to any levy that would discriminate unfairly against our own milk producers?

Mr. Walker: I must repeat this to the hon. Gentleman because he asked for it. Every price review for which he was responsible increased the price of milk. On occasions he agreed to increase it beyond what the Commission proposed. He did

that because he was in a negotiating position.

On the question of prices, I agree totally with the words of the Leader of the Opposition last week when he said, after my right hon. Friend had reported about Luxembourg:
 I repeat very strongly that we shall support her in not giving way on the agricultural price freeze until the budgetary issue is settled."—[Official Report, 29 April 1980; Vol. 983, c. 1154.]

BILL PRESENTED

IRAN (TEMPORARY POWERS)

Sir Ian Gilmour, supported by Mr. Solicitor-General, Mr. Douglas Hurd and Mr. Cecil Parkinson, presented a Bill to enable provision to be made in consequence of breaches of international law by Iran in connection with or arising out of the detention of members of the embassy of the United States of America; And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 204.]

BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, proceedings on the Motion standing on the Order Paper in the name of Mr. Chancellor of the Exchequer relating to the Committal of the Finance (No. 2) Bill shall not be subject to the provisions of Standing Order No. 40(3) and may be proceeded with, though opposed, for a period of three-quarters of an hour after Ten o'clock or for three-quarters of an hour after they have been entered upon, whichever is the later, and that at the end of that period Mr. Speaker shall proceed to put any Question necessary to dispose of those proceedings.—[Mr: Wakeham.]

FINANCE (NO. 2) BILL

Order for Second Reading read.

Mr. Speaker: Before I call the Minister I inform the House that I propose to apply the 10-minute rule at 7 o'clock tonight, if that is necessary. If it is not necessary, I may lift it.

The Chief Secretary to the Treasury (Mr. John Biffen): I beg to move, That the Bill be now read a Second time.
I commend this measure to the House.
This debate takes place under the shadow of yesterday's discussion of public expenditure and, in a sense, might be considered as part of a two-day general economic debate. At the outset, therefore, I should like to comment upon the very formidable speech made by my right hon. Friend the Member for Taunton (Mr. du Cann), because I think that it deserves the reflective consideration of the House.

Mr. James A. Dunn: Where is he?

Mr. Biffen: I informed my right hon. Friend that I would be making this reference and I had a courteous note from him explaining that other parliamentary duties keep him from the Chamber. The fact that he is not here in no sense reflects upon him.
My right hon. Friend said:
 As to the remainder of our conclusions, the Committee recorded its several reservations. In aggregate the list is formidable. It is so formidable as to suggest that the whole strategy may be at risk unless there are variations in policy.
He elaborated on this when he said:
 This country's industrial decline is not being arrested or reversed; it is continuing. In all seriousness, I say to my right hon. and learned Friend that deflation must not be pushed too far, in case it does incalculable harm."—[Official Report, 7 May 1980; Vol. 984, c. 327.]
Those comments have, not unnaturally, been selected by the press for the representation of their savage attack upon the policies of this Administration. I do not believe that those words merit that description, for in respect of the Budget

my right hon. Friend has also gone on record—not in Hansard, admittedly, but in a Conservative publication—as follows:
 The foundations for higher growth, fuller employment, and a return to rising living standards were laid down in the Chancellor's... second Budget.
He proceeded to argue:
 Realism, enterprise, care. Those are the ingredients of one of the best Budgets this country has had for many years.
All this, obviously, will enable us to put these matters into context. My own enthusiasms, inevitably, are always somewhat more muted, as is my nature, but I think it well that the House should know that these are the views of my right hon. Friend, and I hope that the press will give as much publicity to the remarks that I have quoted as they did to those that he made yesterday. [Interruption.] The right hon. Member for Leeds, East (Mr. Healey), who obviously has much experience in this desperate problem of getting publicity, since he appears on stage two days in succession, says that I shall be lucky if these words are read into the record at all. I agree, but we all travel hopefully and often are disappointed.
I should like to make one or two general comments about the economic circumstances outlined by this Bill, and then I will turn to the content. The Bill outlines the means whereby the Government will secure tax revenues of £62,000 million for the current year. Therefore, it is central to the Government's borrowing and spending commitments and it throws into sharp relief the significance of interest rates to the economy and?o the Government's economic strategy.
The Confederation of British Industry has recently complained about the damage caused by persistent high levels of interest rates. That anxiety is widespread. It is certainly shared by hon. Members on both sides of the House, and it featured in yesterday's debate. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) indicates his agreement with my interpretation. I hope that it is agreement that can be forged and fashioned not only this afternoon but throughout the whole Committee stage of the Bill. No single factor dominates interest rates, but at the moment there are four points that I think can


be identified and that are generally propitious.
First, there are signs that international interest rates, with the obvious exception of those in Germany, are falling. Secondly, domestic rates of inflation, although not yet at their peak, are expected to fall, to a Red Book calculation of 165 per cent., by the second half of the current year. I entirely understand the interest that has been shown by the right hon. Member for Llanelli (Mr. Davies), who has always argued that there is a relationship between levels of domestic interest and levels of inflation. Thirdly, the public sector borrowing requirement, estimated for the current year at £8,500 million, is likely to make a smaller demand upon the gross domestic product than did the borrowing requirement for the year just concluded. Fourthly, the money supply figures, as measured by sterling M3, are coming under better control. Since mid-June they have been striking an annual rate of increase of around 10 per cent., and the figure is even better if calculated since mid-October.

Mr. Denzil Davies: The right hon. Gentleman mentioned sterling M3. Does he agree that when there is a balance of payments deficit on the current account, as there is now and is likely to be for some time, sterling M3 is not a very good indicator of the growth of money supply in the economy; that in fact it is a bad indicator; that the best indicator is domestic credit expansion; and that on that basis the Government are not succeeding in controlling the money supply?

Mr. Bitten: First, I agree that domestic credit expansion is an important measure, but I think one has to be very wary of politicians who, having accepted a measuring rod—and sterling M3 is widely accepted as a reasonable measuring rod for money supply figures—from month to month then begin to alter the basis on which they want the calculation to be accepted. I am sticking with sterling M3 in good times and bad. There are many calculations on the monetary figures, other than sterling M3, which would give rather better figures than sterling M3, but I know, for example, that my hon. Friend the Member for Knutsford (Mr. BruceGardyne)

is anxious lest we be too euphoric about this, and I do not think that he would accuse me of being euphoric in the very tentative situation and background that I have just outlined.
There are some who, doubtless drawing upon their acquaintance with Browning, would fear that it was to be
 Never glad confident morning again! 
I do not think that things are that bad. I think that there are circumstances that are quite encouraging, and that a sober and qualified optimism can now exist that market conditions are being created for a fall in interest rates, but it would be wholly irresponsible for me to speculate upon timing, and I wish to read into the record and wholly identify myself with the remarks of the Chancellor yesterday, when he said:
 We shall not be sure of the position until it is clear that current interest rate levels are restraining the persisting excessive rate of growth of bank lending in recent months.
To reduce MLR prematurely would risk undermining our policy to bring down the rate of inflation."—[Official Report, 7 May 1980; Vol. 984, c. 303.]

Mr. John Bruce-Gardyne: I agree very much with all that my right hon. Friend has just said, but he worries me slightly when he refers to sticking with M3 through good times and bad. Surely the essence of our experience over many years has been that we should look at a whole range of figures, and that certainly at times when the current account is in deficit the DCE figures are not to be ignored?

Mr. Bitten: I entirely agree. I am sorry that I had not adequately anticipated my hon. Friend's anxieties by, for example, quoting four factors rather than merely one. He is absolutely right, and I would not wish him or the House to think that I had an excessive concern with sterling M3.
Turning to the Bill itself, I first invite the House to consider clauses 1 to 5, which relate to excise duties. The proposals in the Bill represent a conscious determination to raise further revenue from indirect taxation. There has been only muted criticism of the decision to increase the duties on alcohol and tobacco. The Budget resolutions debate was remarkable on this point. The right hon.


Member for Norwich, North (Mr. Ennals) said in respect of tobacco:
 The 5p extra on the price of a typical packet of 20 king-size cigarettes is inadequate."—[Official Report, 31 March 1980; Vol. 982, c. 73.]
I see my right hon. Friend the Member for Worthing (Mr. Higgins) sitting in his place. His words, if anything, were even more robust. He said
My right hon. and learned Friend is concerned about the effects of increases in indirect taxation on the cost of living index. I regret that the Chancellor did not increase the tax on tobacco by more. We should seriously consider whether tobacco and cigarettes should be taken out of the cost of living index ".—[Official Report, 31 March 1980; Vol. 982, c. 68.]
It is an argument that echoes throughout the House.
Speaking from the Liberal Bench, the hon. Member for Truro (Mr. Penhaligon) said:
 The inclusion of alcohol and tobacco in the cost of living index is ridiculous, and both have come off lightly in the Budget.
He went on to say:
 That is insanity for any long-term economic policy, and it has happened because Governments are constantly terrified of the cost of living index."—[Official Report, 31 March 1980; Vol. 982, c. 95.]
Clearly this issue cannot be resolved either on Second Reading or in Committee on the Finance Bill, but it legitimately raises the whole issue of the problems of indirect taxation in the retail price index. Any Government that embarked upon a policy of rewriting the price index to take account of indirect tax changes would be engaging on an immensely hazardous task.
It is none the less true to observe that there are these feelings in the House. My right hon. Friend is a formidable member of the Select Committee on the Treasury and Civil Service. It is precisely on this kind of issue that the House would feel advantaged if it could have a study and comments. It is in no sense a party political issue. Several Labour Members also expressed anxiety on this point, and we would welcome further comment.
As to the provisions of the Bill, I am certain that the Government have been right to secure additional revenue from these sources.

Mr. Tristan Garel-Jones: May I modestly put to my right hon.

Friend that on 16 May I have been allocated by Mr. Speaker an Adjournment debate on the subject of the effect of alcohol and tobacco prices on the RPI. I hope that he or one of his Treasury colleagues will be able to attend that debate to hear the suggestions that I am sure will come from both sides of the House about the way in which this matter might be looked into.

Mr. Biffen: If I cannot attend the debate, I shall certainly read the Official Report of it.

Mr. Terence Higgins: The statement which my right hon. Friend the Chief Secretary has made, and that which my right hon. and learned Friend the Chancellor made earlier, on the broad question will be welcomed by both sides of the House. May I be more specific about the increase in taxation in the Bill? In real terms the duty on tobacco is being reduced. It has been a long standing tradition, indeed, a rule of the House, that Back Benchers cannot move for an increase in taxation. I am not asking my right hon. Friend to commit himself finally, but will he consider whether we might have an opportunity to vote on whether there should be a higher increase in this tax?

Mr. Biffen: Mr. Biffen What my right hon. Friend says is absolutely fascinating, but, as I want to lead as comfortable a life as possible, I merely say that I will draw his comments to my right hon. and learned Friend's attention.

Mr. J. Enoch Powell: As the Chief Secretary is evidently taking questions at this stage of his speech, may I invite him to confirm that alterations in indirect taxation can affect only relative prices and cannot have an effect upon the total of money prices?

Mr. Biffen: I should be delighted to read the evidence that the right hon. Gentleman might be giving to the Select Committee were it to study this problem and were it to seek his comments.
To interrupt this " Question Time " with a few remarks of my own, I suggest that the House might like to consider clause 11, which concerns value added tax and, particularly, the value added tax registration. This year there are no significant changes in the rates and coverage of VAT, but the threshold has been


raised from £10,000 to £13,500 in respect of annual turnover.
My right hon. and learned Friend the Chancellor has been subject to a number of representations on this point, and the National Federation of Self Employed has argued for a limit of £50,000. Many hon. Members must have received representations of a broadly similar character, that there should be a substantial lift in the threshold of VAT. I shall make two observations on this, because they are pertinent and because this issue will not slide away as the years proceed.
First, we have a clear obligation under the European Community sixth directive in respect of VAT only to maintain the threshold value in real terms. That must be a factor in the Government's consideration.
Secondly—this may be an item which will manifest itself rather more in the future—many registered VAT traders complain of competition from those who are not registered. That problem would intensify substantially if we accepted the kind of advice that the National Federation of Self Employed has been tendering. VAT now provides a yield of about £12,500 million a year, but its narrow tax base makes it a relatively progressive form of indirect taxation.

Clause 17 relates to income tax. This year is a year of modest change. I reckon that without doubt the most important development is the abolition of the lower rate. Personal allowances have been increased by about 18 per cent., roughly in line with inflation during 1979. That move of lifting the threshold was necessary if we were to avoid a whole new conscript army of taxpayers at well below the average national wage.

The decision to use the lower rate as a means of financing the increase in thresholds is controversial to a degree. I see that I have the assent of the hon. Member for Colne Valley (Mr. Wainwright), which I would expect in the light of his speech on the Budget resolutions.

Mr. Richard Wainwright: The Chief Secretary inadvertently may be giving the impression that I assent to the abolition of the reduced rate. I make it quite clear that I oppose it vigorously.

Mr. Bruce-Gardyne: The hon. Gentleman is wrong.

Mr. Biffen: I am sure that my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) meant that I had represented the position of the hon. Member for Colne Valley as opposing the abolition of the reduced rate, and I am sorry if I embarrassed the hon. Member for Colne Valley.
There is a balance to be made—a social as well as an administrative balance—in a situation where, if the lower rate had not been abolished, the increase in the thresholds, given the existing limitations on resources, would have been only 10 per cent. rather than 18 per per cent.
The other factor is that the abolition of the lower rate could save as many as 1,300 staff. Increasingly, the House is anxious to find ways of savings in administration. I do not believe that such savings can be made without alterations in policy. The lower rate will receive the full burial honours of a debate on the Floor of the House. Hon. Members might have overlooked that it has already had a preliminary requiem in the Select Committee under the chairmanship of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). We do not yet know formally what was decided in that Committee, but by courtesy of the Financial Times we know a little. One tends to find out what is happening in the European Community, for instance, in the business columns of The Times or the Financial Times. The Chamber still exists and from time to time it functions; we hope to do our job and draw our pay. Therefore, I should like to put on record what went on upstairs according to Mr. Peter Riddell, who is the economics correspondent of the Financial Times.

Mr. Tim Eggar: Mr. Tim Eggar (Enfield, North)rose—

Mr. Biffen: If my hon. Friend will excuse me, I shall finish what I am saying. I am good natured about giving way, but I must be allowed to make my own speech. That might display a high degree of eccentricity, but that is how I feel.
Mr. Riddell said
 This is just the type of factual questioning of officials about the details of a Finance Bill before the more partisan legislative process "—
that is US—
 which has long been favoured by Parliamentary reformers. It may have been unexciting but no one, for example, can have gone


away any longer believing in the desirability of retaining the reduced rate band of income tax.
I look forward to seeing whether the Select Committee managed to consolidate my prejudices as they have reinforced Mr. Peter Riddell.

Mr. Eggar: Is my right hon. Friend seriously saying that the Treasury team has never used the press to give a forecast of what might be said in future announcements from the Front Bench? If he had received a briefing on events in the Select Committee, he would be aware that the evidence was given in public and that it is in printed form and available to the House.

Mr. Biffen: My hon. Friend is being a shade sensitive. I assure him that Treasury teams spend all their time trying to be reported by the newspapers, or trying not to be reported. I am well aware that Select Committees try to make reports of their proceedings available to the House on the same basis as Hansard. However, they cannot quite match the traditional speed and formula of Hansard.
I am not objecting to the procedures of Select Committees. They are part of life. Anybody in an executive position who is disturbed or upset by Select Committees must learn that they are just part of life and that one must give and take.
I turn to the less contentious issue of small business measures. Clauses 27 and 36 deal with technical matters which, none the less, have a significance for the small business community. The situation was summed up well by the chairman of the Association of Independent Businesses taxation committee. Just after the Budget he said that it contained
 a large number of small provisions which will assist the independent businessman.

Clause 27 deals with relief for interest in respect of money borrowed for investment in a close company. Clause 36 deals with relief for losses on unquoted shares in trading companies. They are technical measures, but they are valuable and will be of real importance in the financing of small businesses. The advantages of such measures will become apparent only once inflation and domestic interest rates are abated.

The major interest in small business legislation has centred upon the capital

gains tax and capital transfer tax provisions in part III, chapter HI, and part IV of the Bill. My hon. and learned Friend the Minister of State will deal with that in greater detail later. I shall confine myself to a modest point but one which is of significance and worth placing on the record.

The capital transfer tax threshold will be doubled to £50,000 in the Bill. That puts capital tax thresholds higher in real terms than at any time since the introduction of estate duty in 1894—one of the few Liberal bequests to our present economy. Since business relief has its own consequences, effectively the threshold will be £100,000.

I commend the reforms to the House with no sense of apology for the supposedly modest nature of their provision. I proceed not unaware that many interests outside the House are disappointed that a more wide-ranging and generous tax reform in respect of capital was not essayed in the Budget. Given the balance of decision that the Government had to take, not merely in the Budget but in public expenditure, it was probably a reasonable economic and social Budget.

Of course, the penalties on capital remain high. If we want a spread of power and ownership outside the present concentrations of corporate authority we must seek further taxation reforms. I leave the matter there. My hon. and learned Friend will refer to it again later. In no sense am I apologetic in outlining our proposals to the House.

I turn to the question of charities, which features in a number of clauses, namely, clauses 52, 53, 54, 79 and 98. Obviously any major reform of charities can be undertaken wisely only if the Chancellor and his fellow Ministers are conscious of the need to protect the revenue base. In commending our proposals, I assure the House that we are well aware that any measure in this direction has consequences for the revenue yield. To set that aside would be short-sighted.

Wherever we look in Britain today we see many examples of where one should accept and welcome a partnership or at least a co-existence between the State and private authorities. That might be said of social work, including health and education, and the promotion of the arts.

The changes will have beneficial consequences for private work in the areas


that I have mentioned. The changes have been fashioned in the light of recommendations by the Goodman committee and the National Council of Social Service. The measures include doubling from £100,000 to £200,000 the present capital transfer tax exemption limit for transfers to charities made on or within a year of death. They provide for the total exemption from development land tax on disposals of land.

The measures provide—and this issue has probably caught the most public attention—for the reduction of the minimum period for charitable covenants to enable the payments to qualify for tax relief from " over six years " to " over three years ". Finally, there are provisions to enable payments made by individuals to secure relief at the higher rates, even though the charities can claim only at the standard rate.

The total cost of these measures is estimated at about £30 million in a full year. I think that they will be seen over a period to add up to quite a significant package in attempting to secure a more lively role for charities in the social life of this country.

Mr. Tam Dalyell: Following discussions on last year's Finance Bill, a number of hon. Members expressed considerable concern about the definition of charities, and followed that by plaguing the Leader of the House for a debate on the Goodman report out of the context of the Finance Bill. Parliamentary time was not found for that, which was a pity.
I wish to ask the Chief Secretary two questions. First, will he have anything to say in Committee on the vexed question of the definition of charities? The matter is regarded as unsatisfactory on both sides of the House.
Secondly—and it is my only question on the right hon. Gentleman's speech—it will be within his recollection that during the passage of the National Heritage Act some open ends remained about the consequences of the Finance Bill on legislation passed after the coming into operation of the National Heritage Act. Have those open ends been cleared up?

Mr. Biffen: Almost certainly the open ends will not have been cleared up to the satisfaction of the hon. Gentleman,

if only for the reason which he described concerning the difficulties last year on having a discussion within the confines of the Finance Bill. I take entirely the anxieties felt about the definition of charities, and to some extent the role of the Charity Commissioners and the means whereby charities are registered and surveyed.
The hon. Gentleman will appreciate that that is essentially a matter which falls within the ambit of the Home Office. I shall undertake to ensure that my right hon. Friend the Leader of the House is made aware of the point that he has made. It would be quite misleading if I were to suggest that the Finance Bill would enable the sort of discussion that I know he would like.

Mr. Dalyell: What about the heritage?

Mr. Biffen: I shall look at that point. I think that my hon. and learned Friend the Minister of State can deal with that more adequately than I can.
An amiable atmosphere has prevailed in the last few minutes—as we have moved away from the explosive issue of Select Committees—but I now find that I have to make a few rather controversial comments, although they may command the wholehearted consent of the House. The right hon. Member for Leeds, East has turned up for the second day in succession. One can only wonder what it is all about. It cannot be that he has any lack of confidence in a very formidable Shadow Treasury team, so we can dismiss that consideration. My hon. Friend the Financial Secretary last night suggested that it might be something to do with the leadership of the Labour Party, and I think that that is—

Mr. Denis Healey: Very boring.

Mr. Biffen: Yes, it is very boring. I could not believe that the right hon. Gentleman's presence was something to do with the leadership of the Labour Party. Clearly, it will be an issue that obtrudes relentlessly upon our discussions.
I wish to place on record that I very much hope that the right hon. Gentleman becomes leader of the Labour Party, on the basis that Mr. Harold Macmillan said that politicians, broadly speaking, were divided between bookies and


bishops. In no sense could the right hon. Gentleman be described as episcopal. There is something rather brass-faced, a lack of offence and a lack of shame, which is nature's bookie. I see that role for the right hon. Gentleman.
As we come to conclude our deliberations on the Finance Bill, it is well to remember what odds the right hon. Gentleman has been shouting over past years, because the odds are a bit different at the moment. The book that was created in the past is there for all to see—for example, the March 1974 Budget, when income tax was increased from 30p to 33p, which seems an age away; the July 1974 measure, the fine tuning par excellence, of reducing VAT from 10 to 8 per cent. to secure the spurious statistic of an annualised 8·4 per cent. rate of inflation for the purposes of the autumn election, a point which my hon. Friend the Member for Horncastle (Mr. Tapsell) will remember. The April 1975 Budget increased income tax from 33p to 35p. The April 1976 Budget reduced the top rate of VAT to 12½ per cent. which one may think ran counter to the book, except that the right hon. Gentleman had raised it the previous year.
So we go through the record of our newfound bookie, who hopes to shout the odds for the Labour Party at the next election. We shall fight happily on his record, and also on our performance.
The hon. Member for Norwich, South (Mr. Garrett) has said " Tell us about your Finance Bill ". I tell him that we are putting to the House today a responsible Finance Bill which fulfils three objectives. First, it tries to raise revenues which are relative to spending to enable a manageable borrowing requirement. This is not a " cut tax and run " Budget. Secondly, it puts a modest but sensible further emphasis on indirect taxation. Thirdly, it contains reforms which should assist the financing of smaller businesses. As the months go by, I think that we shall look back upon these measures and be proud of the degree of realism and modesty that they contain.
I say to my hon. Friends, let us by voice and by vote secure Second Reading this afternoon.

Mr. Denis Healey: I enjoyed the speech of the Chief Secretary—as I always enjoy his speeches—especially the last-minute foray into rabble-rousing on his Back Benches, which was slightly ungainly and had a slight odour of oil. What we like most about the right hon. Gentleman is the gloomy fatalism that he always displays about his own ability, as an economic Minister, to influence anything that happens in the economy. We find that that has a certain melancholy charm.
I confess that my spirits were lifted at the beginning of the right hon. Gentleman's speech when he offered to talk about the remarks made yesterday by the right hon. Member for Taunton (Mr. du Cann), and to treat the debate as the second day of a general debate on the economy. My spirits fell when he confined his remarks on the economy to quoting a speech made outside the House by the right hon. Member for Taunton, which simply demonstrated—as we all recognised—the single-minded and longstanding devotion of the right hon. Member for Taunton to the leaders of his party. It had nothing whatever to do with the economy.
Beyond that, the right hon. Gentleman spent his speech dealing largely with points of detail in the Finance Bill, which, no doubt, will be further discussed in Committee. I prefer to follow the direction in which his hand pointed at the beginning of his speech, even though he did not choose to walk in that direction himself. The right hon. Gentleman will recall that, 12 months ago, he took office, together with his colleagues on the Front Bench, pledged to a clear break with the economic and social policies of all post-war Governments of all parties. The keystone of that policy—which I know the right hon. Gentleman had a part in laying—was to reduce inflation by controlling the money supply, and to improve Britain's economic performance by cutting taxes and setting the people free. I think that he would agree that that is a fair short summary.
A year has now passed. Inflation has doubled to 20 per cent. and is still rising. As the Prime Minister pointed out the other day, two-thirds of the increase is due to the Government's own actions—to the increase in VAT to 15 per cent.,


contrary to all the Government's election promises, to big increases in rents, rates, public service and sector charges, the devaluation of the green pound and record interest rates.

Mr. Bruce-Gardyne: On a point of order, Mr. Deputy Speaker. I put it to you that we heard this speech yesterday, and that if the right hon. Gentleman wants to repeat himself he might as well read it into the record, as is done under the Congressional system.

Mr. Deputy Speaker (Mr. Bernard Weatherill): That is not a point of order, and I am afraid that I was not here yesterday.

Mr. Healey: I am glad to say, Mr. Deputy Speaker, that your memory is rather better than that of the hon. Member for Knutsford (Mr. Bruce-Gardyne). I did not make this speech yesterday, as I think you agree.
I am afraid that the hon. Member for Knutsford is not complaining about the fact that I have said this before, but rather that the facts which I have recounted are rather inconvenient to him. I know that he does not like hearing them again, but I am afraid that he must.
We also have record interest rates—the Chief Secretary referred to this—which have been sustained longer than interest rates have ever been sustained in the past. That has been reflected in mortgage rates, not 15 per cent. as is often said, but, for most people, well over 16 per cent. That is only the most visible effect on inflation of the present level of interest rates.
As to our economic performance, productivity is falling, unemployment has risen by 200,000 since last September, after two years of continuous decline, and the balance of payments deficit is enormous and still rising. The only bright spot which the Prime Minister could find in the Government's economic record, when questioned about it last Thursday, was an increase in living standards over the last year. But no one knows better than the Chief Secretary that those who have enjoyed an increase in living standards owe it entirely to the most dramatic of all the Government's economic failures, namely, that earnings have risen faster than prices in the last 12 months because ordinary

men and women acted according to the monetarist theory of rational expectations, not by looking at the figures of money supply but at the increase in prices which the Government had told them to expect as a result of their own decisions.
Nine months after the Chancellor's first Budget he is introducing a second one. According to the Chancellor, the first Budget organised a substantial reduction in the total tax burden, including the disastrous lurch from direct to indirect taxation, which is responsible for excessive wage increases in the last 12 months. At that time, the Chancellor claimed that the reduction in the overall tax burden would lead to a great improvement on the supply side of the economy. But this second Budget, and the Finance Bill which we are now discussing, mark the most spectacular U-turn in Government policy, because they deliberately cancel out all the tax benefits which the British people gained from the first Budget. This second Budget is increasing total Government revenue by £1,500 million, and everyone in the country is now much worse off after two Tory budgets, except a tiny minority of very wealthy people—[HON. MEMBERS: " Like you."]
As the Chief Secretary must admit, the economic effect of that is to cut gross domestic product this year by half per cent., at a time when it is already falling rapidly. Therefore, in their forecast, the Government have had to tell us that they expect gross domestic product to fall this year by 2½ per cent. We discovered from the Select Committee's investigations that manufacturing output will fall by 4 per cent. this year. The balance of payments deficit is likely to amount to £2½ billion, and as the right hon. Gentleman said, the retail price index will still be 16½ per cent. year on year at the end of this year—not by the second half, but by the end of this year.
I remind the House that all this has taken place in the first year in our history when North Sea oil and gas are giving us really substantial benefits. Thanks to last year's oil price increase. North Sea oil and gas will this year add 5 per cent. to our GDP. The benefit to our balance of payments will be £7,000 million, and, according to the Chancellor in the Budget debate, the Government will gain £4,000 million in revenue.
Moreover, the oil factor is improving our inflation rate by pushing up the value of the pound in a way which would certainly not have happened, given all other aspects of the Government's economic performance. I must congratulate the Chief Secretary and his colleagues on the stupendous achievement, in the face of overwhelming odds, of producing that sort of catastrophe when all the external factors should have led the Government to economic triumph.
Yesterday, the Chancellor said that it would take time for his policies to work. But we all want to know how long. The Chief Secretary did not attempt to answer that question. To help us in our discussion of the Finance Bill, all that we have had is a glimpse of the Government's thinking, because the prospects which I have just described from the Government's own forecast represent only the first year of a four-year financial plan. I well understand the stories in the newspapers that the Chief Secretary fought bitterly to prevent that plan being published, and how right he was! I suspect he fought against it because he does not believe in planning at all or in any sort of forecast, as he has so often told us. But there might have been another reason, which is that the prospects revealed by the plan show that there will be no significant improvement in our economy over the next four years.
The main weapon by which the Government propose to reduce the growth of money stock to 4 per cent. from 8 per cent. by 1983–84 is a reduction of the PSBR to 1 or 2 per cent. of GDP in that year, through cuts in public expenditure and, I remind Conservative Members, increases in taxation over the next four years. We debated the public expenditure part of those plans yesterday, and there were doubts on all sides about the realism of the White Paper. There were even graver doubts about whether the objectives set down in the White Paper could be achieved without what the right hon. Member for Taunton described as a wholly unacceptable rise in unemployment, shrinkage in our industrial base and an increase in prices.
In fact, as the right hon. Gentleman knows well, this so-called four-year plan is not a plan at all. It is a statement of the objective which the Government hope

to achieve in four years' time. Between now and then, as with the public expenditure White Paper, we shall be presented with a lot of empty boxes. The year by year changes in money supply, expenditure and so on, are not intended to represent Government decisions or policies or even forecasts, but are just illustrative assumptions as to the path by which, under some circumstances, the objective in four years' time can, perhaps, be achieved. The key assumption is that growth, after falling this year by 2½ per cent., will rise on average by I per cent. per year in the following three years. But we learnt from the Select Committee's discussions that there will be a further fall in output next year, and that, for the objectives of the financial plan to be achieved, we shall have to get a 2 per cent. annual increase in output in the last two years of the plan.
I ask again, as no one answered this question yesterday—I hope that the Minister will do so tonight—from where will the increase come? The plan expects manufacturing output to fall continually by 6 per cent. over the four-year period. It expects public expenditure to fall continually by 4 per cent. over the period. It expects the output of North Sea oil to rise over the period by only 2 per cent. Therefore, from where will the growth come? It cannot come from services alone, such as bingo parlours or hair dressing salons. There was some suggestion earlier—I think in Committee—that it might come from a growth in world trade. But I am bound to say that the outlook for world trade over the next four years is very disturbing indeed and the Government are taking no initiative to improve the outlook.
When the Chancellor of the Exchequer went to the interim committee in Hamburg the other day, he allowed it to dodge every single important issue. As the right hon. and learned Member for Hexham (Mr. Rippon) pointed out yesterday, the Governments of the industrial world at the moment are engaged in competitive appreciation through an interest rate war. No attempt is being made to deal with that problem, although it is certain to plunge the world into a yet deeper recession. Currency instability is bound to grow unless something can be done to make the dollar stronger, as the


world's only reserve currency, or to replace it by some other currency or mix of currencies. Nothing was done about that.
Private bankers all over the world are worrying about the failure of non-oil developing countries to finance their deficits. Nothing was done about that. The interim committee dodged even the creation of a substitution account which might offer some small alleviation of the problems of the dollar as the world's only reserve asset.
The only contribution, as far as I have been able to discover, made by the right hon. and learned Gentleman in Hamburg—I am relying entirely on a long report in The Times—was that he had the gall to lecture countries which are suffering from the oil price increase, rather than benefiting, not to follow his example in deflating their economies so as to reduce world growth.
The Select Committee was certainly right to believe that the Government's growth forecasts are a great deal too optimistic, but in that case every other aspect—[Interruption.] I wonder whether the hon. Member for Knutsford, who is very habituated to chattering away in a recumbent posture, would either shut up or stand up.
If the growth prospect over the next four years is as bad as the Select Committee made out—[Interruption.]—then every other aspect of the Government's programme is bound to be worse, too, and there will be no prospect—this will wipe the smile off those grinning Conservative faces—of a tax cut in election year. But unemployment—and I know that Conservative Members will smirk at this—is likely, according to the Select Committee, to rise to as high as 2½ million by 1983. We shall have much lower growth and much higher inflation.
The conclusion of this must be that in 1984, after four years of Conservative rule, the country will be producing less than when the present Government took office last year, and will be lucky if inflation is back to single figures, as it was for 18 months before the last general election. The fact is that the Government's own policies, as revealed in the Government's publication at Budget time, show no light at the end of the tunnel. The darkness simply deepens as the country moves further

inside it. Meanwhile, there will be an appalling cost in industrial ruin and wasted lives.
I know that Conservative Members—they have betrayed this many times—have no interest whatever in the increase in unemployment. But let us look at the increase in bankruptcies. Last week, the High Court announced compulsory winding-up orders against 161 companies—the highest number of company failures ever recorded in Britain in a single day. They are not just small companies, although most of them are. The last-minute rescue of Stone-Piatt Industries shows that many large companies are also on the way to bankruptcy.
The Mechanical Engineering Federation has just announced that it expects a 15 per cent. fall in output this year and a fall in investment way above the fall of 6 to 10 per cent. predicted by the Government. It is the same in the textile and clothing industries. Let us look at the CBI's survey, published only last week. Exactly a year ago—just before the general election—optimists outnumbered pessimists by 6 per cent. Today the balance of opinion has swung towards pessimism by a margin of no less than 41 per cent.
So far, the financial sector has been little affected by this, but Sir Henry Benson, who advises the Bank of England on these matters, warned us a day or two ago that banking, insurance, investment and other financial services depend primarily on the strength of our manufacturing industry. He predicted that if things go on like this, the influence and power of the City of London in the world would steadily decline.
I am not at all surprised that in this situation the Chancellor of the Exchequer, as he demonstrated very clearly yesterday, is running scared. He made a speech last week at Milton Keynes to the dazed audience in the local chamber of commerce and talked of the Chief Secretary's recent speech—to which I shall refer in a moment—as a warning to " soft liners ". He said:
 I hope no one gets me wrong on that. By ' soft liners ' I don't mean anyone in the Government. I mean some of the pundits and pontificators. The fair-weather prophets. They too easily believe that there is some escape from the need for sustained fiscal and monetary discipline.


Those who are warning the Government now and asking for a change of course are not just Keynesian " wets ", who have been so frequently described and listed by the Prime Minister. They are the monetarists themselves, the London Business School, and an increasing number of monetarist economists in the City of London. I should not be at all surprised to see Greenwells issuing a blast against the Government's monetary policy in the coming weeks, because every serious monetarist economist believes that the Government are expecting far too much of monetary policy, are putting too much strain on it, and are adopting policies which are far too strict.
The real trouble is that the Prime Minister was persuaded by the right hon. and learned Gentleman himself, among others, to adopt these policies on a false prospectus. She was led to believe, as she said only the other day, that the fall in the growth of money supply would be followed by a fall in the rate of inflation in one and a half to two years. But the Chief Secretary put her right on that. He told us, quite rightly, in a pleasant Biffenism, if I may so call it, that there was
 no mechanistic and succinctly demonstrable link between a movement in the money supply and a subsequent change in inflation.
Of course, the right hon. Gentleman is right. There are long and variable lags—like the hon. Member for Knuts-ford. [Interruption.] But there may also—and the right hon. Gentleman would admit this—be no link whatever; in fact, nobody has ever proved a link to exist. [Interruption.] Conservative Members do seem to be rather upset, Mr. Deputy Speaker. I wonder whether we should ask them to go out and take a drink of bismuth or some other calming fluid.
The proof that I am right on this is the fact that in this four-year financial plan—the purpose of which is to get inflation down—figures are given for every variable except inflation. There are no figures given for the rate of inflation under this wonderful four-year plan. There are no figures given for the RPI in the three years following this year, because, of course, the Government have not the slightest idea whether their policies will work.
The Chief Secretary—I know that he studies these matters—knows perfectly well that there is no way of guessing in advance how far a reduction in the money supply will be followed by a reduction in output or a reduction in inflation. The one certain thing is that a Government who rely for economic management on money supply alone are bound to encounter a cost in output for any fall in inflation which is wholly disproportionate to the gain. The most extraordinary feature of the Government's present position is their argument that they are fixing targets for nothing except the money supply—and that in four years' time—because money supply is the only thing that is under control of the Government.
The right hon. Gentleman must already have learnt that it is as difficult to control the money supply—and the results are as uncertain in their effects—as it is to control demand or any other variable. But of the six major countries in the world which have had monetary targets over the last five or six years only Canada has kept within the target consistently. Yet the value of the Canadian dollar has fallen steadily, even against that of the American dollar.
Britain has a better record than the average. In two years out of three we hit the target. Germany has never hit the target and yet Germany has the lowest inflation. The difficulty of controlling the money supply is infinitely greater when one has the corset and when exchange controls have been abolished. If we include the avoidance of monetary control through acceptances and we also include avoidance—impossible to quantify now that we have abolished—through the abolition of the exchange control, the increase in money supply over the last 12 months must be at least 1 per cent. above the Government's range and 3 per cent. above the target of 9 per cent. set by the Financial Secretary to the Treasury. In the last six months the increase in money supply must have been at least 2 per cent. above the 7 per cent. target set by the Financial Secretary. It was pointed out by the hon. Member for Knutsford that if we take domestic credit expansion—which is a more relevant measure of money supply when there is a large balance of payments deficit—the situation is much worse.
If the Chancellor wishes to stick to his monetary targets he is quite right not to cut minimum lending rate because he is right to say that one swallow does not make a summer. The Chief Secretary to the Treasury is quite right to support the Chancellor. I put it to the Chief Secretary—I think he would agree with me—that it is quite impossible for this Government to achieve a monetary target as strict as they have set themselves—still more to reduce it—year by year without high interest rates and increases in taxation.
As the Chief Secretary knows, our interest rates are high in nominal terms but they are barely positive in real terms. In Denmark and Belgium real interest rates are 10 per cent. above the rate of inflation. In this country the 17 per cent. MLR is below the rate of inflation and most lending rates are about the same as the rate of inflation. That is why the Government's financial plans require not only the continuation of very high interest rates but, on top of the public expenditure cuts, a continuous increase in the burden of taxation.
A point which the Chancellor and the Chief Secretary hid from us in these debates—it is set out clearly in the Red Book—is that over the next four years they plan that the tax burden should increase from 36 per cent. of GDP to 38 per cent. Only half of that increase will come from oil revenues, according to the Government. I wish to ask some questions on that issue, because they will be relevant to our discussions of the Bill in Committee. Most external experts believe that the Government's estimates of oil revenues are far too low for the coming years. We start with £4 billion this year, according to the Chancellor. Most outside experts think that in a few years' time the revenues will be several billion pounds higher than the Government estimates.
Critical here are the assumptions that the Government make on three points, and I hope that we shall be given some guidance on these points during the later stages of the debate. What are the Government's assumptions about the real price of oil? I believe that the Government think that the price will not rise. They are unwise to believe that. I believe that the real price of oil is almost certain to rise over the coming years.

Indeed, it will rise as a result of the economic sanctions against Iran which have been proposed by the European Community.
What is the Government's assumption about the exchange rate against the dollar? If the exchange rate rises against the dollar our revenues will, of course, tend to fall because the oil will be worth less in sterling terms. Is that the assumption on which the Government base their curiously low estimate of oil revenues? Or is it that the Government are, very sensibly, planning to restrict their depletion policy and take less oil out of the North Sea? I hope that that is the case.
The Government must tell us whether that is so, because the future of our economy over the next few years will depend to a significant degree on the amount of revenue which the Government get from North Sea oil and gas. For the Government to produce figures that are either dishonest or based on assumptions that are not disclosed is to deceive the House, in my view, and to run great risks with the future of our economy. The Government's plans imply high interest rates, continuing cuts in public expenditure and a continuing fall in manufacturing output. The purpose of all this agony is to reduce the public sector borrowing requirement in order to lower sterling M3.
Again, the Chief Secretary knows—and the Red Book says—that there is no direct or predictable relationship between the PSBR and the growth of money supply. Nobody said that more clearly than Professor Milton Friedman in the debate which the Chancellor and I had with him on television recently. There is no relation between the two at all. Falling interest rates—if the Government bring down PSBR with the purpose of getting interest rates down—are likely to mean more company borrowing. That will tend to increase the money supply. Falling interest rates are also likely to reduce the external value of the pound and so increase inflation.
I hope that we receive some comment on these points from Conservative Members, because it really is not good enough to present us with a few slogans picked out of 20- or 30-year-old text books as an excuse for crucifying the people of this country on half-baked dogma.
In this particular area of the PSBR. it is extremely difficult to resist the conclusion which was reached by Mr. Christopher Johnson, writing in the Lloyds Bank Economic Bulletin. He said:
 The £ M3 and PSBR targets in the strategy are barely compatible with each other, both difficult to achieve, and neither can guarantee a speedy reduction in the inflation rate if it is achieved.
I believe that that is plain and obvious truth. However, if the Government disagree I hope that some Minister will tell us why.
Certainly the financial markets agree with me and they agree with Mr. Christopher Johnson because, if they believed in the Government's long-term plan, long-term interest rates would have fallen far below their present level. But, of course, the markets do not believe in the strategy of the Government. They do not believe that that strategy will bring down the rate of inflation. Therefore, long-term interest rates continue to stay very high in relation to short-term interest rates. And if the markets do not believe in the Government's monetary policy—they follow it and understand it—how on earth can the Government expect anyone else to believe them and to adjust their economic behaviour according to this theory of rational expectation?
No one who has looked at the detail of the Government's policy—as the Select Committee has done and as I have described it—can fail to come to the conclusion that the Government are crucifying the British people in blind devotion to half-baked theories which they half understand.
I believe that the real answer to the problem lies in a speech made by the Financial Secretary the other day, in which he said that it would be much better to describe the Government's policy not as monetarist but as fiscalist. In fact, all this monetarist mumbo-jumbo is just so much froth on the beer. What the Government really believe in is old-fashioned deflation to teach the workers a lesson. We are back to the thirties with a vengeance. They really believe in the outmoded theory of the Phillips curve—that if one can reduce living standards and reduce activity, somehow or other people will cut their wage claims and inflation will come down. All the experience of the post-war period, not only in Britain but

elsewhere, suggests that that is absolute nonsense.
Of course, going back to the thirties in economic theory is accompanied by the way in which the Government structure their tax cuts in this Bill. Any person in this country who is married with two children and with under £15,000 gross income is worse off as a result of the tax changes in this Budget. The interesting thing to me, I must confess, about a Budget produced by a Government who came to power offering to do something for the middle manager, is that the middle manager suffers very much more than most other groups. A man on £200 a week takes a 3 per cent. cut in his living standards as a result of the Budget. But the real picture as between rich and poor is shown by the fact that the 1½ per cent. of the population who earn over £20,000 a year get 10 per cent. of the tax cuts in this Budget, whereas the 7 per cent. of the population who earn under £2,000 a year get only 3½ per cent., and the low-paid suffer worst of all through the abolition of the reduced rate band—although, of course, all suffer, because by abolishing the reduced rate band the Government, in an underhand way, are cutting the indexation to which they were committed, by 7 per cent. to 11 per cent., from the 18 per cent. which they should have offered.
No one who has looked at this Budget can doubt that it marks just another tombstone on the way to disaster. The Finance Bill is part of a general Government strategy which has no chance of success. Even within its own terms, as I have demonstrated, it is bound to cause immense and needless suffering to the people of this country. For that reason we shall not only critcise it mercilessly in Committee; we shall vote against it tonight.

Mr. Kenneth Baker: The House has not, I think, been subjected to two economic speeches from the Shadow Chancellor on two consecutive days ever before. Perhaps all hon. Members have now come to the conclusion that one can have too much of a good thing.
We are debating the Second Reading of the Finance Bill. Quite clearly, on the allocation of duties on the Opposition


Front Bench, when the Finance Bill came up the Shadow Chancellor must have turned to the right hon. Member for Llanelli (Mr. Davies) and said " Denzil, when it comes to the Finance Bill, you deal with the Bill and I will deal with the finance ", because in effect what the right hon. Gentleman has given us today is a further economic speech. There have been two major economic speeches in the last two days. In fact, they were interleaved with one from the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) last night. Therefore, we have had three major economic speeches from the Opposition Front Bench.
I listened to every word of all three speeches. I would have hoped that one would have had some glimmering of what the alternative economic strategy of the Labour Party and the Opposition was. That we have not had. We have had a sustained tirade against the Government's policy. Listening to those three speeches was rather like looking at the three volumes of a large Victorian three-decker novel. Each volume was thick, heavy and large, though handsomely bound, but in fact modern readers cannot penetrate it through the complexity of the plot and the turgidity of the prose.
The one bit of those three speeches that stuck in my gullet was a phrase used last night by the right hon. Member for Sparkbrook—who is not now in his place, although he was a moment ago—when he was attacking the Government for cuts in their housing programme. He said that Conservative Ministers will always cut council house building because
 They are attacking a housing sector in which they have never lived and in which they expect never to have any relations."—[Official Report, 7 May 1980; Vol. 984, c. 404.]
When those words fell from the right hon. Member's lips, I could not help wondering in which particular council house he would be laying his head to rest last night. That sort of comment is humbug.
The Shadow Chancellor's criticism of Government policy would carry greater weight in this House and the country if he were prepared to indicate what alternative he was offering the country. He owes it to this House, if not to his own party or the country, to delineate the alternative economic strategy of the Opposition Front Bench.

Mr. Healey: Mr. Healeyrose—

Mr. Baker: I shall give way to the right hon. Gentleman in a moment.

Mr.Healey: Good.

Mr. Baker: Do not worry. I shall take interruptions from the right hon. Gentleman in my own time. I hope that he does not think that he is addressing a meeting of the Shadow Cabinet.
In no element of the speeches that the right hon. Gentleman has made has he given any sort of Budget judgment himself. He has said that he would not cut public expenditure. That is one thing that is quite clear. But he has given us no judgment as to the level at which he would establish the PSBR. Would it be £10 billion, £12 billion or £15 billion? Whichever figure it is, how would he finance it?

Mr. Healey: I fear that the hon. Gentleman has not been attending our debates regularly. He should recall that in the Budget debate I said that we should have a PSBR this year of at least £11 billion. That was consistent with the views of the London Business School, from which the Government have taken their own chief economic adviser. If the hon. Gentleman wants more of my views on Labour Party strategy, I should be very glad to send him a series of lectures.

Mr. Baker: It is interesting to know that the right hon. Gentleman said that, because in the three speeches that we have heard in the last two days it has not been reiterated by himself or by his right hon. Friend.

Mr. Healey: Mr. Healey I do not believe in repetition.

Mr. Baker: If the right hon. Gentleman says that he advocates a PSBR of £11 billion, he owes it to the House to say how he would finance it. Clearly, from what he has said today, he would not finance it by higher taxation.

Mr. Healey: Mr. Healeyrose—

Mr. Baker: Perhaps the right hon. Gentleman will allow me to speak for a moment. He owes it to the House to say how he would finance it and what level of interest rates would be necessary to finance that level of PSBR. He also owes it to the House to say how he would actually determine the level of the PSBR.

Mr. Healey: Mr. Healey rose—

Mr. Baker: Will the right hon. Gentleman allow me to continue for a moment? I shall give way to him eventually.
Quite apart from the level of the PSBR, the right hon. Gentleman also owes it to the House to say what his attitude on incomes policy is. He has criticised the policy—[Interruption.] Will the right hon. Gentleman please keep his peace for the moment?
The right hon. Gentleman in the last two days has criticised the Government for their attitude on public sector wages. He has said—I know this because I have heard of speeches from him in the country to this effect—that he favours a voluntary incomes policy. But is that the Opposition's policy? Is that supported by the hon. Member for Liverpool, Walton (Mr. Heffer) and Opposition Members below the Gangway? What is the Opposition's policy on this matter?
The right hon. Gentleman has criticised the Government's industrial policy. He has said that manufacturing industry in Britain is in great difficulty. But what is his industrial policy? Is he in favour of general import controls or selective import controls? He has made some speech somewhere, in some remote part of our island, saying something on import controls, I have no doubt, but why does he not come to the House and present an alternative industrial policy? [Interruption.] I shall give way shortly. Do not encourage the right hon. Gentleman.
If the right hon. Gentleman announces such a policy, how much support will he get from his own Back Benches? Will the hon. Member for Oldham, West (Mr. Meacher) support him if he says that he does not want import controls, which is what he said in the country?
The right hon. Gentleman has said that the corporate sector is under pressure. He said it yesterday and again today. After all, he knows a great deal about squeezes upon the corporate sector because he imposed one of the fiercest in his first Budget in 1974, and he made the corporate sector's position very much worse in his last Budget by the national insurance employers surcharge.
I am not being unfair to the right hon. Gentleman when I say that, if one distills what has been said in the last two days in his speeches, one finds two new ideas.

One was in the conclusion of his speech yesterday, when he said that there was a need for an urgent study into the financing of the nationalised industries. I agree with that 100 per cent. However, a study of the financing of nationalised industries does not add up to an economic strategy. As I understood it, the right hon. Gentleman was arguing today for a lower level of interest rates, a view that will find echoes on both sides of the House. However, that again does not add up to an economic strategy.
The right hon. Gentleman has been silent on the big issues and voluble on the small ones. He cannot claim credibility inside or outside the House if he does not spell out Labour's alternative. If we are to be led to a Socialist Utopia, we should know before we go to paradise whether we are going via Leeds or Bristol.
The right hon. Gentleman made great play of the Select Committee's report. I am glad that he welcomed it. It has been a great contribution. I pay tribute to my right hon. Friend the Member for Taunton (Mr. du Cann), who has been an outstanding Chairman of the Select Committee. It is clear that the work that we have been doing has been of some significance as the Chief Secretary and the Chancellor have referred to it in their speeches. That indicates that at least they have read it.
I rather like the attitude to the report of my right hon. Friend the Chief Secretary, who says that we have to live with Select Committees. He has observed that they are adversary but good natured. I hope that that attitude will rub off on to his Treasury officials, among whom there is a tendency to sneer. As they will come back before the Committee in six months to explain how accurate their forecasts are, they should be a touch more careful about sneering.
I shall deal with the Government's economic policy as it affects business. The situation that faces industry now is grave. Britain was one of the first countries and economies to forecast a drop in its GDP. It is to the credit of the Treasury that when other countries in the Western world were still forecasting growth it forecast a drop. America is now forecasting a drop in GDP, and in general other countries of Western Europe are doing so. The prospects for


world trade are exceedingly gloomy and depressing.
We were told in the Select Committee that manufacturing output will fall by 4½ per cent. this year. I hope that that will not happen, but if it does it will mean a higher level of bankruptcies and more unemployment. What can the Government do to ease the burden upon British industry? There are various areas where the Government should be considering action.
As regards interest rates, I listened carefully to what my right hon. and learned Friend the Chancellor said yesterday and to what my right hon. Friend the Chief Secretary said today. I am disappointed that the level of interest rates is not beginning to decrease. The Government's targets on money supply are being reached. I appreciate the argument that one swallow does not make a summer, but in April the growth of the money supply was one quarter of 1 per cent. In the past four months it has been under 1 per cent. That is a great achievement for the Government's policy and of great credit to the Government.
I emphasise to my right hon. and hon. Friends on the Front Bench that it is a matter of judgment and not of principle when interest rates can be eased. I hope that my right hon. and hon. Friends will take the earliest opportunity to begin to follow the American example of reducing interest rates. One of the consequences of maintaining too high a level of domestic interest rates is to encourage the inflow of money and thereby increase the money supply.
I turn to the effect of capital expenditure cuts upon British industry. As the Select Committee has said, the cuts proposed in the Budget are significant. However, as the Financial Secretary said last night, they are not of the same level as the expenditure cuts introduced by the right hon. Member for Leeds, East (Mr. Healey) in 1976–77.
It would be idle for us to pretend that the cuts are not heavy. They will have an effect upon the building and construction industries. I hope that when the Government feel that there is some scope for relaxing the severity of their policies they will consider public investment in capital projects as their first priority.
If my right hon. Friend the Prime Minister is successful in her renegotiation

of Britain's contribution to the Common Market, that will result in money that is not involved in Budget strategy. It is, as it were, a reserve. That is what we are fighting to gain in the negotiation with Europe. If we are successful in gaining that reserve, I hope that an early demand upon it will be public investment in capital projects.
There is a significant cash squeeze on industry, as the banking figures showed only yesterday. From my own experience, it is likely to worsen this year. Many companies will find themselves in difficulties.
One of the burdens that industry has to bear is the direct responsibility of the right hon. Gentleman, and it is not concerned with inflationary wage demands. I refer to the national insurance employers' surcharge. It is a heavy burden upon industry. I hope that later in the year the Government will think of helping industry through its cash difficulties by putting right the wrong that was done by the Labour Government.

Mr.JohnPatten: On the potential or possible future reduction of the employers' surcharge, does my hon. Friend agree that if the Chancellor in some future Budget statement were to reduce the surcharge there would not be a direct trade off between that and the PSBR?

Mr. Baker: The answer to my hon. Friend's question is " Yes and no ". Much depends on whether my right hon. and learned Friend wants to do that. He could do it by increasing the PSBR, or he could find some other way of making good the shortfall. I suspect that there would be a margin that would allow him to do that without necessarily increasing the PSBR. I believe that that would happen.
There are some who argue that the plight of industry is such that we should reduce corporation tax significantly. I am not in favour of that. However, I am in favour of a fundamental change in corporation tax. Companies in the manufacturing sector are paying about half the going rate of corporation tax, which is 52½ per cent. They are paying 20 per cent. or less because of stock relief and capital allowances. Companies in service industries are paying much nearer the


actual level of corporation tax, namely, 45 per cent. or 50 per cent.
I am slowly coming to the view that it would be better over a period of years to eliminate the discrimination against service industry companies. The present corporation tax has a discrimination in favour of manufacturing industries, but it is the service industries that will find so many of the new jobs. We must consider carefully whether we want that tax discrimination to continue. We could have a much lower level of corporation tax—about 20 per cent. or 25 per cent.—if we phased out stock relief and reduced some of the capital allowances.
That is a radical suggestion. It would have a material effect on the cash flow of every British company and it could not be done quickly. It would have to be undertaken over a number of years. I am glad that the Chancellor and the Chief Secretary will be producing later this year a Green Paper upon corporation tax. Corporation tax gives encouragement to manufacturing industry, but it bears unduly heavily upon service industries.
The Government have been exceptionally brave this year in producing a medium-term financial secretary—that was a Freudian slip when we consider the personality concerned. I of course meant " strategy ". I think that the Government have been exceptionally brave and far-seeing. I share the reservations that were expressed by my right hon. and learned Friend the Chancellor yesterday and by my right hon. Friend the Secretary of State today about sticking out their necks so far for two, three or four years ahead.
I have learnt from my business experience. I worked first on a five-year budget, but I soon became tired of apologising to bankers and shareholders and explaining why the targets could not be met. I came down to three-year budgets, and the apologies were a little more careful but they still had to be made. It is realistic in the conduct of the economy to be precise and definite over only a short period in the immediate future. That is why the Select Committee concentrated many of its comments and questions on the immediate year.
We should not disguise from ourselves the success that the Government have

already had in a short period in controlling the money supply and bringing it down to a reasonable rate of growth. I hope that that will provide the basis for a greater expansion in the years ahead.

Mr. K. J. Woolmer: One problem of the Government's policies over the past few months stems from a basic conflict in their objectives. They aim to bring down inflation and reduce unemployment while trying to change the balance of economic behaviour from community to self-interest. The result is confusion and failure. Their policies of deliberate inequality and attacks on social expenditure have resulted in higher prices, increased VAT, mortgages, rents, bus and train fares and poorer services. The irony is that a Government pledged to fight rising prices have been busy raising them almost every month. Housewives in particular feel betrayed. I have come across the feeling of betrayal again and again on the part of the electorate that a party elected to fight inflation has increased it. The Government's policy of deflation by an obsessive and miopic concentration on monetary aggregates, with a total disregard of the real world, living standards, markets for producers and profits, has rapidly increased the number of bankruptcies and unemployment.
I am disturbed when I hear economic Ministers saying again and again that they can do nothing about rising unemployment and collapsing industries. They suggest that it is someone else's fault. They suggest that their policy is almost non-government. That is a smokescreen. The Government are actively and deliberately involved in creating the mess. VAT was doubled by the Chancellor. That was not an accident or beyond his control. He cannot wash his hands of that. In the coming months we shall have further massive price rises through deliberate acts of policy and not as a result of factors beyond the control of the Government.
The refusal of the Chancellor to spell out the consequences of spending cuts stems from fear and not uncertainty. For example, in recent weeks housing spending cuts have attracted a great deal of attention, and I suspect will attract even more in the next two or three years. In


practice those cuts will mean a massive rise in council house rents. The Government plan to reduce housing expenditure on current prices by about £3,000 million over the next four years. If housing investment expenditure is reduced by one-quarter, with the remainder to be found by raising council house rents, those rents will rise by £9 a week within three years. That is a deliberate act of policy and not something over which the Government have no control. How can the Government ask wage earners and trade unionists to exercise restraint and take notice of monetary aggregates reducing by 1 per cent. per year over four years in their wage bargaining when for millions, rents, which are only one item of expenditure, will rise by £9 a week?
The expenditure White Paper this year is almost a Finance Bill. Concealed in it is a massive increase in indirect taxes and, consequently, the cost of living. Had that been a proposal in a Finance Bill, presented as an open increase in indirect taxes and consequently prices, it would have caused a near riot.
The hon. Member for St. Marylebone (Mr. Baker) said that the Government should concentrate upon their detailed estimates for only one year ahead. However, I believe that we should look at the measures in more detail and press Treasury Ministers on the consequences of the White Paper for bus and rail fares, council house rents and steel prices—all items that make up the cost of living. We should realise that the Finance Bill conceals only a small part of a shift in policy that will damage the average person on lower pay and help the more highly paid.
Among the revenues flowing into the Exchequer are taxes and other receipts from North Sea oil and gas, which my right hon. Friend the Member for Leeds, East (Mr. Healey) mentioned. For some reason the Government greatly underestimate those revenues. In terms of present prices the Government state that North Sea revenues will rise from around £1 billion a year for 1978–79, the last year of a Labour Government, to £6½ billion in 1983–84—in other words over £5 billion. That is a massive sum, equivalent to 5 per cent. on the standard rate of income tax. Outside estimates by respected and responsible private institutions put the 1984 figure at between £101/2 billion and £14 billion a year. A variety of assumptions

can be made, but the assumptions on which those latter figures are estimated are reasonable. I follow my right hon. Friend by asking the Minister to give much more information about the basis of the Government's estimates. What are their estimates on the exchange rate and the real price of oil? What are their estimates with regard to deflation policy and the level of output of North Sea oil?
Governments always have reasons for not wanting to reveal assumptions behind their estimates. However, when estimates involve sums of that magnitude, which could have a substantial effect on the direction of economic policy, we should ask why the Government's estimates are £8 billion or £9 billion different from those of outside commentators.
As the hon. Member for Taunton (Mr. du Cann) said yesterday, it is not good enough to treat North Sea oil as the pools win of an impecunious unemployed man. We are still a great industrial nation and we are discussing the Government's economic policy for this nation. The revenues are substantial. They are the equivalent, by 1984, of between 10p and 15p on the standard rate of income tax. They are the equivalent, almost, of totally abolishing VAT, or of a 50 per cent. increase in all net investment in machinery, factories, schools and houses in this country. We are talking about truly substantial amounts.
There will be no single answer as to how best to use those revenues. Some views are already widespread. I suggest that they should be used as far as possible for investing in our future, rather than frittering away on tax cuts and spending on imports. That is a common view in this country. The revenues will not last for ever, so we must use them wisely so that we leave our economy and our environment stronger, not weaker.
In part, there is a need to invest in energy conservation and the development of alternative energy sources. There are whole areas in environment and housing where improvements are badly needed. For example, there are still more than one million houses in this country which are unfit or lacking in basic amenities. There are more than one million houses which require more than £1,500 spent on them. This usually occurs where an elderly owner-occupier cannot afford to maintain his house. Many houses are


falling into disrepair quicker than we are repairing them. Many areas of our environment are blighted with dereliction—in towns and cities as well as old mining areas.
It is relatively easy to agree on the improvements that we want to see. Of course, our industries need investment, buildings and machinery. We need better production, management, marketing and design training. It is more difficult to agree on how to do that. It is very worrying that as a nation we seem paralysed by the potential benefits of North Sea oil and gas. Instead of a blessing, North Sea oil is proving a curse. Foreigners appear to know the importance of these revenues; hence the overvalued pound, which bears no relation to our manufacturing competiveness.
The Government are letting our resources slip away by default. First they are misleading the nation about the extent of these revenues. Their estimates are so wildly out of line with those of outside commentators that the Chancellor should explain why this is so and justify it to the nation. Secondly, the Government seem to take the view that there is nothing that they can do to make good use of these revenues anyway. On present form, we shall look back in a few years' time and ask what we did with the revenues. I expect that we shall say that we used them to reduce the public sector borrowing requirement, and the effect of that was to force the economy into deeper recession, bring about higher unemployment and maintain the exchange rate at a level where imports rose and exports fell. Then we shall say that an election approached so we gave some of the revenue away in income tax cuts. The effect of that was a consumer boom and a huge rise in imports. Can anyone in this country imagine the Japanese or the French Government saying that they did not know how to get Government, industry and financial institutions together to make good use of the resources?
The present Government's posture of non-intervention, non-planning and even of non-forecasting is irrelevant and misguided in the modern world. But, worse still, such a posture could mean the total waste of a unique opportunity in our

history at a time when other industrial nations are envious of our North Sea oil resources. They find it impossible to believe that the Government simply do not know how to use these revenues. It appears that some form of dialogue on this issue may have begun between the TUC, the CBI and the Government at yesterday's National Economic Development Council. I welcome that development if it reveals a willingness by the Government to re-think their laissez-faire position on this issue.
I hope that in responding to the debate tonight, the Minister will not only spell out the reasons for the assumptions concerning these revenues, but will justify them and indicate a willingness to think again about capturing the public's imagination in order to see that these resources are used for improving our economy and environment. I hope that the Minister will show us how these resources can be used adequately to strengthen our economy for the better, instead of the worse.

Sir WilliamClark: The argument of the lion. Member for Batley and Morley (Mr. Woolmer) was slightly illogical. He started by saying that prices are high, and I accept that. The Government are reaping the harvest sown by the previous Chancellor of the Exchequer when the money supply went out of control and when PSBR overspending was absolutely tragic for the future of the country.
The hon. Member went on to say that we could use North Sea oil and that the forecasts for oil revenues were wrong. He seemed to say that if we got the forecasts right everything would come right. Therefore, in the context of his argument it does not matter if we receive £4 billion or £10 billion. If we eat into the North Sea revenues now by heavily subsidising council rents, gas prices, and bus and rail fares, the only way that the Government can control those prices is to give an extra subsidy to the nationalised industries. That in itself would increase the borrowing requirement and would mean that when North Sea oil revenues came in we would have to repay money that we are using now. The illogicality of that argument is typical of the economic policies of the Labour Government.
The right hon. Member for Leeds, East (Mr. Healey) made an amusing speech, but some of us had heard it all before. As Chancellor, he presided over the Treasury for many years, but his only contribution to the economy was to double unemployment and prices, halve the value of the pound and double the national debt. For him to criticise this Government is simply not good enough. Sometimes in this House we hear such hypocritical speeches from people who really should not throw stones.
I was interested in the remarks of my hon. Friend the Member for St. Maryle-bone (Mr. Baker), who made a most thoughtful speech, about stock relief. The Government should give some thought to this matter. If stock relief were abolished it would enable the Chancellor, with that extra revenue, to reduce corporation tax by 10 points. In other words, the 50 per cent. level would be reduced to 40 per cent. and the lower rate of 40 per cent. would become 30 per cent. There may be something in this, because we must remember that the economy of this country is not only made up of manufacturing industry; it also includes the service industries.
I welcome this second Finance Bill. It looks as if we shall have only one Finance Bill a year in future. That is an improvement on the past. I am not so sure that I envy any hon. Member who serves on the Standing Committee on the Bill, which has 107 clauses and 18 schedules. I agree with the general strategy of the Government, but it is obvious from speeches on both sides of the House that, irrespective of party, most hon. Members believe that we still have a long way to go before we get the economy right.
Direct taxes have been reduced and there has been a switch from direct to indirect taxation. At present I do not think that there is much room for a general reduction in taxation. In this context I take up a point that my right hon. Friend the Chief Secretary made when he spoke for some time about the customs and excise duty on tobacco and alcohol. He claimed that when the price of cigarettes was increased by 5p a packet there was muted criticism. I can tell him why there was criticism—everyone expected it to go up by far more. I would have thought that the Government's strategy

of switching from direct to indirect taxation should have been brought to bear on the price of cigarettes and drink. It would have meant more revenue for the Government in order to reduce either general taxation or the public sector borrowing requirement.
We get paranoiac about tobacco and alcohol in the sense that both figure in the retail price index. This is complete and utter nonsense. I smoke and I drink. Neither is a necessity of life. Less than half the population of the country smokes. If there could be all-party agreement to remove tobacco from the RPI, it would be a step in the right direction. It is ludicrous to place 5p on a packet of cigarettes, 2p on a pint of beer, 8p on a bottle of wine and 50p on a bottle of whisky. My right hon. and learned Friend the Chancellor could have gone further, but the RPI is all-important. I understand the Chancellor's dilemma when the RPI figures so much in wage bargaining.
I welcome the VAT exemption. I hope that some time my right hon. and learned Friend will look into the search powers of the Inland Revenue. I shall not elaborate on that issue now, but it is an area of our fiscal system, whether applying to VAT or income tax, that should be examined.
I agree with the strategy of the Government. I believe, unlike Opposition Members, that the public sector borrowing requirement should be ruthlessly cut. While the Government are borrowing over £1 million every hour of the day, they are competing for money available in the market. Interest rates will obviously remain at a high level. Everything possible should be done to reduce the public sector borrowing requirement.
While discussing the PSBR—or overspending as I prefer to call it—may I say that I hope that my right hon. and learned Friend and his team will look at a suggestion I made some time ago in a debate. I believe that there is a loophole in our control of public finance in that the spending Departments do not have a financial watchdog to look after their budget.
I am delighted with the Finance Bill's contents in relation to capital taxes. The capital transfer tax changes mean that two-thirds of those who would have been


liable for tax are removed from that bracket. The reduction and the alterations in capital gains tax also mean that roughly half those who would have been liable to tax will no longer be liable.
I do not think that the time is right now for any general reduction in taxation, but these debates should provide an opportunity to set down markers for the next Budget and the one after that. The investment surcharge, which produces £250 million for the Revenue, is a definite disincentive to the accumulation of wealth. I am not referring to millionaires. It is a disincentive to those who save. We should get rid of it as soon as possible.
I recognise that my right hon. and learned Friend has increased the exemption limit on stamp duty. When house prices in London, in particular, are considered, I believe that the exemption limit needs to be examined again.
I am worried about the effect of capital transfer tax on smaller companies. Most of the very small companies, up to £100,000 in value, will be exempt from CTT. My concern relates to the slightly larger company—the unquoted company that employs 50, 60 or 70 people. That business is worth more than £100,000.
It is invariably from the family unquoted company that job creation springs. These are the companies of innovation and invention—the potential job creators. Their industrial record is invariably excellent. The family is engaged in the business. Everyone knows everyone else. There is no lack of commmunication. There are no strikes. I should have thought that for them CTT could be a killer.
If an owner dies and wants to leave the business to his son, there is a huge capital transfer tax liability. Although this can be paid in instalments, some parts of the business will have to be sold, someone from outside the family will have to be brought in, or the company has to go public. The capital transfer tax may fall to be paid at a time when it is not profitable to sell such a business. There is a danger that, in a forced sale, brought about by taxation, the ownership of the company could go to a foreigner.
I like the emphasis that my right hon. and learned Friend has started to place on charities. I believe that charities should be helped. For too long, ever since 1945, there has been a growing feeling that the State should do everything for everybody. There has been a rundown of organisations that used to help. Any action that will build up these organisations, possibly through fiscal measures, takes away from the State all the responsibilities of looking after those who want looking after. It is niggardly of the Revenue to tax the bounty that voluntary organisations such as special police, volunteer firemen and lifeboat men might receive during the year. I leave that thought with my right hon. and learned Friend, hoping that action will be taken.
I hope that the Minister who replies will utter some words of comfort—I accept that it cannot be done in this Budget—about the future of small businesses. I refer to medium-sized businesses, including close companies. There is a tremendous amount of locked-in money in close companies. Our tax laws mean that it is not worth while taking it out. If taken out, it is considered a distribution. I have written to my right hon. and learned Friend about the matter. It is ridiculous that money should be locked up in a company simply because, if taken out, it is known as a distribution and heavy tax has to be paid.
The taxation balance is coming right. There is still a long way to go. My right hon. and learned Friend, in his Budget speech, if I may paraphrase his remarks, said " We have done something about capital transfer tax and capital gains tax. This is an earnest of our intentions. There will be other Budgets." Now that a strategy has been started, the Treasury team should not lose heart but should keep going with the strategy. We have tried the rest. We have tried to buy ourselves prosperity. We have tried to buy ourselves out of this and that. It does not work. The economy will work only by maintaining the realism that is now becoming evident. We want good housekeeping nationally. That means living within our means. I hope that my right hon. and learned Friend will not be deflected from that course.

Mr. Richard Wainwright: It was a pleasure to hear from


the hon. Member for Croydon, South (Sir W. Clark), who is a senior Conservative Back Bencher, a long-overdue chastisement of the appalling stamp duty and his comments on the mean and niggardly changes that the Government propose, at least in their first thoughts—I hope that they will have second thoughts—in the Bill.
The Government are pledged to support the get-up-and-go citizen and the enterprising people who are prepared to move from areas that have been deprived of regional grants—to alleviate the acute population shortage in the South-East. Such people are the objects of the Government's devotion and that fact, coupled with the Government's often-proclaimed support for the family, makes it grotesque that stamp duty should be maintained with so little change and with no regard to the cost of housing a family if one has to move several times in a working lifetime.
Hon. Members will recall that at the weekend in the dying days of March, immediately after the Budget, commentators expressed astonishment at the apparent acquiescence of the public in a Budget which, overall, increased the burden of taxation and broke many of the promises of the Tory manifesto at the general election.
Many reasons have been adduced for that apparent acquiescence. The first is that the Budget had been leaked so assiduously and precisely in the preceding weeks that there were no surprises, but a false sense of relief. It is sickening that those who are the first to insist on secrecy and denying the public freedom of information happily go round leaking like sieves when it is expedient to do so. However, I cannot believe that that was the main reason for the apparent acquiescence.
Another explanation, much favoured in the circles in which I move and in particular in my constituency, is that those who would have been inclined to protest at the breaking of Tory election promises on tax reductions paused for a moment and considered what the Budget would have been like if it had been introduced by the Labour segment of the Opposition. There may be something in that, but I do not believe that it was the whole reason.
A more compelling possibility is that one of the main increases in taxation received not a syllable of mention in the Budget speech, but was introduced silently and stealthily a few days after the Budget. I refer to the jacking up again, in this case to the tune of an addition of virtually ½ per cent. of gross pay, of the national insurance contribution. That is a silent tax to which the House devotes little attention, but it produces a yield much greater than that of corporation tax and about half that of income tax.
A correspondent in The Times today points out that in his first pay slip after the Budget he noted that he had paid £2–45 less income tax than in the previous month, but had paid £4–51 more in national insurance. Of course, his employer, who is probably hard pressed in these times of artificially induced recession, has to pay a similarly increased burden. That increase received no mention in the Budget. It was not until some days afterwards or, in the case of monthly paid employees, virtually a month later that people realised the truth.
But the main reason why the Budget did not cause blood to run in the streets, or even lead to widespread demonstrations, was undoubtedly the fact that to some people the extra burdens of taxation are trivial compared with the pay settlement fiesta which has been going on all year, to the prospective ruin of our economy. It has been not merely unrestrained by the Government, but positively encouraged by the Prime Minister. Every settlement that does not exceed 20 per cent. is greeted even if it is in an industry that is patently bankrupt or heavily subsidised by the taxpayer, with a shrill cry of triumph, as if it were a splendid endorsement of the Government's monetarist policies.
It is well known that the Government are hastening towards an emergency pay freeze, but in the meantime people are doing so well in certain sectors where they have industrial muscle that they are able to ride the Government's taxation burdens with a certain philosophical calm.
The odd thing about the Budget from the Liberal Party's point of view, which must be shared by many in other parties and in none, is the U-turn over incentives. Incentive was the magic word in Tory circles 18 months ago, but it was absent


from the Budget. At a Conservative garden fete in the grounds of Alnwick castle last July the Chancellor of the Exchequer told his adoring audience:
 We have already done many of those positive things we promised in our election programme. The economy is beginning to respond. Since our first round of tax cuts people are finding it more and more worthwhile to work. And to work in Britain ".
One has to make allowances for such heady occasions, with a duchess's embrace and the tasteful pictures of the Leaderene tastefully displayed among the tasteful flowers. Such circumstances sometimes give rise, even, I suspect, occasionally with the Chief Secretary, to a certain extravagance of language in order to encourage people to have a go on the coconut shy and join in the fun of the fair. But it is disappointing when such splendid flourishes are followed by a Budget which offers no incentives to anyone.
The other feature is the Government's rank cowardice over excise duties. Just think, Mr. Speaker, what magificent reductions could have been made in the more grievous and harmful taxes if the Government had summoned up an ounce of courage to revalorise the duties on tobacco, alcohol and gambling. That was not done. Indeed, tobacco is now cheaper in real terms than it was a year ago. That is partly due to the Government's refusal to have an incomes policy, which puts them cringing at the mercy of the retail price index. They have no defence against rises in the index.
Another grevious fault in the Bill is the sabotage to our hitherto progressive tax structure that is caused by the abolition of the reduced rate band. By getting second-hand opinions of what went on in the Select Committee, the Chief Secretary has got it wrong. In my judgment, it was generally agreed at that hearing, and I was among those who agreed, that income tax on those on below average earnings is in such a shambles that the present reduced rate of 25 per cent.—compared with a basic rate that is not much higher at 30 per cent. and on such an absurdly narrow band as £750, and with income tax cutting into the incomes of the very low paid, including even some on family incomes supplement—is not particularly glorious.
However, there is no possible warrant for arguing from that unhappy state of affairs that everybody should hit the income tax at the full basic rate of 30 per cent. or whatever it will be in the future. The Chief Secretary is known to be an extremely civilised man. I cannot believe that he could possibly support the idea that an income tax system should first affect people at the full basic rate so that they move, as a result of one hour's extra work, from zero to 30 per cent. income tax. It is the mark of the beast to behave like that. Only the Australians in the whole of the rest of the world do so, which perhaps has a moral of its own.
The Liberal Party—I hope that the Labour segment of the Opposition will take the same view—intend to defend the reduced rate as part of the structure of a civilised income tax. However, to defend, it is necessary to attack. The reduced rate would make far more sense if it were 20 per cent. so as to contrast with the basic 30 per cent., and if it were on a much wider band of income. If the Government had shown any courage about the excise duties on gambling, tobacco and alcohol, they could have financed the reduced rate band in that way.
Another disappointing feature is that the Government have reneged so con-spiciously on their earlier promises of a drastic reform of capital taxation. Instead there are a series of dubious changes which, I am afraid, will take the sting out of virtually all our capital taxes intended to foster the redistribution of wealth.
The trouble is that members of the Government have so little experience of the real world outside, representing, as most of them do, constituencies well south of the Trent, and often in occupations in which they do not come up against the facts of life.
The facts of life are that estate duty and, more recently, the capital taxes introduced by the right hon. Member for Leeds, East (Mr. Healey) have their effect by making wealthy people part with their wealth much earlier than if, left to their own devices, they would ever have dreamt of doing. The value of estate duty and capital transfer tax has been to oblige somewhat mean, egocentric and grasping wealthy people to share out their businesses, to trust the younger generation,


and to distribute wealth in middle life rather than incur penalties after death—and, indeed, in Yorkshire, the shame of paying heavy capital taxation.
When the sociology of the twentieth century is properly written it will be discovered that the main effect of the capital taxes has been the magnificent leverage of getting the blighters to part with their wealth. This has been destroyed by the aimless sabotage in this Finance Bill.
It is a great disappointment to Liberal Members of Parliament that no incentive has been introduced for wider share ownership amongst those who do not happen to work for companies that are quoted on the Stock Exchange. It will be agreed, I hope, that no party in the House has been keener for generations on employee share ownership than the Liberal Party. Because of our interest in that subject we are well aware, sometimes painfully aware, that at the end of every meeting held to advertise our schemes for employee ownership, invariably questioners in the hall, with every right on their side, say " It is all very well for these chaps in the mill, but I am a civil servant "—or a teacher or a professional man—" who cannot incorporate myself into a limited company. What concessions are you giving me to become one of the share owners? This is a powerful argument. It is important that tax concessions should be evenly spread as far as possible among all groups of the working population.
The French have dealt with this matter, so far, with brilliant success, in the Loi Monory, which allows every French household to deduct about £500 a year from its taxable income if it can show the revenue that it has invested that much in industrial shares—not in gilt-edged or the French equivalent of national savings certificates or any racket like that. That has has a dramatic effect. One of the French authors of that law has been over in this country submitting himself to severe questioning, to which he stood up extremely well. Yet the Government have apparently shown no interest in this. Certainly there is not even a whiff of it in the Finance Bill. In closing, I ask the Minister of State to tell the House when he winds up the debate, whether there are indeed even inquiries on foot

in the Government as to the possibility of a British version of the Loi Monory, for implementation taken at any rate in due course.
It will be apparent from what I have said that, without any hesitation, my right hon. and hon. Friends will vote against the Bill in the Lobby tonight.

Mr.W.Benyon: It is unfair of the hon. Member for Colne Valley (Mr. Wainwright) to castigate my right hon. and hon. Friends on the subject of incentives. Considering the difficulties that (he Chancellor has been up against, he included a great number of incentives—not as many as we should like, but still a considerable number.
I agree wholeheartedly with the hon. Gentleman on the subject of the Loi Monory. We must consider this matter thoroughly. It has great possibilities for this country.
In my innocence, I thought that yesterday there would be a debate on the wide policy aspects and that today we should be talking about the Bill. Indeed, a number of Government supporters have discussed the Bill. However, the right hon. Member for Leeds, East (Mr. Healey) and others have not done so.
I propose this evening, in the short time available, to concentrate on those aspects of the Bill that deal with capital taxation, and in particular with the omission of any measures to reduce the impact of capital transfer tax on let agricultural land as opposed to land that is farmed by the owner. In doing so I reiterate what is in the Register and declare an interest as a farmer.
I am well aware of the difficulties that faced the Chancellor in framing his Budget this year. I am equally sure that the Government appreciate that many people in farming see the absence of any concessions on this point as a logjam that is preventing progress towards the revival of letting agricultural land in general. However, I wonder whether people outside agriculture really understand the gravely detrimental effects of the present tax position not only on the economic aspect of agriculture but on the social side as well.
Let me illustrate that very simply by taking the example of a farm of 250 acres, which is modest in size by anybody's


assessment today. If the owner farms it himself, his heirs will lose 20 per cent. on the inevitable transfer that takes place. If he lets that same farm, 44 per cent. will disappear. As the farm size increases, so the difference becomes more marked. Incidentally, these figures take into account the difference in value between the market value of owner-occupied and let land.
From the point of view of capital taxes the industry is in a worse position now than it has ever been. In his report Lord Northfield acknowledged the importance of the let sector in agriculture. He said he hoped that if by the reliefs that he suggested and recommended—or by other means—the private landlord was enabled to continue, this would be greatly to the advantage of agriculture in general.
Also, of course, both the NFU and the CLA, representing the tenants and owners respectively of agricultural land, have urged the Chancellor to introduce suitable CTT relief for let land. I think that it is salutary in this connection to ask what is the ideal structure which any of us would like to see in the rural parts of our country today. I am sure that the answer must be that we should like to see the maximum number of holdings commensurate with viable agriculture in the area concerned: well-equipped farms, well financed, but under the present system quite the opposite is happening.
The owner looks at his vacant farm and decides not to let. The new entrant is debarred from starting in farming. Tenanted farms lose the investment that they need. This tax forces landowners to concentrate their management and investment resources upon land which they farm themselves and which will be best placed to survive the tax that will be charged upon the inevitable transfer. Only a low priority can be given to investment and improvement or even to repairs and maintenance of the let parts of their property.
The more the price of agricultural land rises, the more the tax bites, and equally, and conversely, the more the landlord-tenant system increases in importance, because this allows the equity to be shared between the tenant and the owner, for their mutual benefit.
What the agriculture industry is asking is not that owners of tenanted land

should be placed in a specially privileged position, but only that they should be able to get the relief for which they would qualify in any case by fanning the land themselves or, alternatively, by investing in another business.
Agriculture is now an industry which is made up of small to medium-sized businesses—there are very few large-scale enterprises—and capital is its lifeblood. This tax is detrimental in many ways, but its effect on investment is the worst of all. This whole question of investment has been given considerable attention in the report of the Select Committee which we were discussing yesterday, particularly in paragraphs 12 and 29. It implies a considerably worsening position and should be read in agricultural terms also in the context of the Brandt report. A real study of the Brandt report shows that we shall need every ounce of food that we can produce, and this can be achieved only by greatly increased investment.
Everywhere in the world we see that a prosperous economy goes in hand with prosperous agriculture. I have yet to find a place in the world where there is prosperous agriculture in an impoverished economy. That just does not occur. A Government who profess and, I know, wish to help such businesses should ensure that the tax system permits these enterprises to obtain their capital in the most efficient way possible. We need the landlord-tenant system now more than ever before, we need it badly, and at the moment it is dying on its feet. Only the Government can revive it.

Mr. Martin J. O'Neill: I realise that it is a good deal easier to get into the debate tonight than it was last night. The fierceness of the competition, I imagine, was attributable to the fact that last night we were debating the public expenditure White Paper, and to an extent this Finance Bill is an even paler shade than the White Paper. This unimaginative set of proposals was adequately dealt with by my hon. Friend the Member for Batley and Morley (Mr. Woolmer) as far as the cuts in public expenditure are concerned. Those are the parts of the Budget about which we are not really going to hear where there will be the shift from public to private enterprise,


on the assumption that if, somehow, we reduce public expenditure our productivity will increase. Certainly those of us who have major nationalised industries with great productive potential in our constituencies, as I have with the coal industry, see the denial of funds to those industries as a complete contradiction of the alleged aim of this Government to increase our gross national product.
I think that part of the lack of interest in the Bill is due to the excessive leaking that occurred prior to the Budget, when we had a plethora of forecasts about how much would be put on the price of a pint of beer or a gallon of petrol. At the end of the day, the proposals put forward by the Government were not as bad as many people had expected. Indeed, the Sun had the headline " The Chancellor's Feather Duster ".
I do not expect this Government, whose economic policies seem to be based on an understanding of economics with which it would be possible to achieve only a very poor pass in A-level economics, to be preoccupied with economic literacy. However, in view of much of what has been said this evening about how we should go about taxing spirits and tobacco, I feel that it would be desirable for the Chancellor to turn his mind to finding a means whereby we can tax things like spirits and tobacco on an ad valorem basis, in such a way that the tax would be responsive only to increases in price through inflation. Let us do away with this annual pantomime about the amount by which the Chancellor will raise the level of taxes on beer and cigarettes, because this, in my estimation, tends to diminish the significance of the Budget and has the effect of providing a smokescreen in the debate on the state of the economy, which should be the essence of such measures as the Finance Bill.
I think it is fair to say that to us the whole question of changing the RPI is as offensive and as irrelevant as the introduction last year of the tax and prices index. We have heard very little of the tax and prices index because, of course, we now see changes in income tax this year which will probably result in more tax being paid by the British taxpayer anyway. So the Government have chosen effectively to ignore their latest indicator and

have gone back to defending the old faithful RPI.
I maintain that it should be possible to find some means of linking certain items of indirect taxation to some kind of index system. If we have a Rooker-Wise type amendment for the direct taxation system, we ought to have something similar for the indirect taxation system. I feel, however, that if we are to extend the indexation of tax thresholds we should do it across the board and seek to redress the situation which at present pertains whereby about 1·5 per cent. of taxpayers who are earning over £20,000 will receive 10 per cent. of the tax cuts whereas those who are earning £2,000 will receive only about 7·5 per cent. of the cuts.
We have not heard a great deal today about corporation tax. I feel that the Government missed a great opportunity by not putting into clause 18 some reference to a windfall profits tax on the clearing banks. As a means of expressing solidarity with mortgage and overdraft holders, and as some measure of comfort to show us that we were not forgotten in this Budget, the Chancellor had the opportunity of getting an increase in revenue and at the same time providing a modest increase in public expenditure, without even contravening his own monetary guidelines.
In recent months the results of some research have been published in the Journal Applied Economics. In discussing the sensitivity of the London clearing banks' profits to changes in bank rate between 1951 and 1970, Nurali Peera, of Salford university, showed that a 1 per cent. increase in bank rate contributed about £34 million to the profits of the banks, and between those years the excess profits amounted to about £2,166 million. It would be wrong for me to forecast exactly the banks' overall profits as a result of the increases in the bank rate in the past 12 months, but it is all too clear that these increased profits do not come from any increase in efficiency or improvement in services. Their contribution to the national welfare would be greatly enhanced if we could get our hands on a considerable proportion of these excess profits.
I come now to clause 53. I listened with interest to the argument that there should be co-existence between State and


private provision in the running of charities. That is a hobby-horse of mine. There are two notable schools in my constituency, a public school called Dollar academy, and an impoverished local authority school, due for replacement, called St. Mungo's academy. Those two schools co-exist. If the suggested changes in taxation in respect of charities are made, the parents of the children who attend Dollar academy will benefit from reduced fees, while St. Mungo's academy will close down because of the inability of the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, North (Mr. Fletcher) to make up his mind or to find £½million in 1981 and another £½ million in 1982 to provide for a new school. That £½ million is roughly the share that Dollar academy gets from its charitable endowments.
This is a minor constituency point to raise on the Second Reading of the Finance Bill, but I do so because the Bill will do nothing to improve the chances of the youngsters when they leave school to get employment. I suspect that boardrooms and barrack rooms will await the children of Dollar academy, but for the rest of the children there is a very bleak prospect.
As long as inflation is running, even by the Government's expectations, at about 16 per cent., as long as there is a £15,000 million increase in tax take with no appreciable improvement in public sector investment, and as long as we have a 17½ per cent. minimum lending rate, I see no possibility of our children having a chance of employment when they leave school, and their prospects of getting a reasonable rate of unemployment benefit are becoming more and more remote.
The Budget and the Finance Bill were stated by the Chief Secretary as having three basic aims: responsible revenue raising, emphasis on indirect taxation and the financing of small businesses. The way that we approach the higher profile areas of revenue raising by an annual jamboree, with either a vicious Chancellor taking money out of people's pockets by increasing the duty on beer, or a generous Chancellor allowing us to get drunk to forget our problems, is not

a responsible way of raising taxes or of conducting an economic debate.
Emphasis has been laid on indirect taxation. Over the year, it is likely that direct taxation will rise, but it is equally likely that there will be no possibility of a reduction in income tax for the country as a whole, and all the alleged advantages of increased incentives through reduced taxation will be lost for yet another year. In vain have I looked for something concrete in the Bill that will help small businesses and offset the effect of the high rate of interest.
Those of us who yesterday tried to get in on the public expenditure debate can look to the Finance Bill with even less optimism than we can to the minimal provisions in the White Paper on public expenditure. There is no way in which the Government will fulfil their objectives through the Bill.

Several Hon. Members: Several Hon. Membersrose—

Mr.DeputySpeaker(Mr.BryantGodmanIrvine): Mr. Speaker has asked me to advise the House that from 7 o'clock the 10-minute rule will apply.

Mr. Bruce-Gardyne: On a point of order, Mr. Deputy Speaker. I think I am right in saying that there is an hour's extension for the debate, and given the length of time that the right hon. Member for Leeds, East (Mr. Healey) took, the logic of the 10-minute rule, in these circumstances, seems a little obscure. May I ask for your guidance?

Mr. Deputy Speaker: The hon. Gentleman knows that I have only just taken the Chair. The last word that I had from Mr. Speaker was to the effect that I should announce to the House that he wanted the 10-minute rule to be applied from 7 o'clock. That is what I have done.

Mr. James Hill: Further to that point of order, Mr. Deputy Speaker. Surely it will depend on the number of speakers waiting to be called. It is a very thin debate, and my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) will not be able to content himself with 10 minutes.

Mr. Deputy Speaker: No doubt Mr. Speaker had all these matters in mind when he gave me this instruction. It is never possible to judge from a list exactly how the debate will go. Sometimes hon.


Members on the list are not here, while hon. Members not on the list are here.

Mr. John Bruce-Gardyne: We shall probably have to pursue that later, Mr. Deputy Speaker.
The hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) was dangerously eccentric in what he said. He devoted his remarks to the Finance Bill. That was certainly not in accord with most of what had gone before. He is in good company with my hon. Friend the Member for Buckingham (Mr. Benyon), but the Finance Bill seemed to be the last matter in the mind of the Shadow Chancellor, the right hon. Member for Leeds, East (Mr. Healey).
I have a fair amount of sympathy with what the hon. Member for Clackmannan and East Stirlingshire said about the indexation of indirect taxation and the windfall profits of the banks. Both matters need to be examined again and they are germane to discussions on the Finance Bill.
I hope that I shall not be considered dangerously back sliding if I devote some of my remarks to the public expenditure White Paper and the Select Committee report which we had before us last night. Before concluding my remarks I shall do my best to return, as did the hon. Member for Clackmannan and East Stirlingshire, to the Finance Bill.
The Leader of the Opposition was keen that the debate on the public expenditure White Paper should take place before the Second Reading of the Finance Bill. Having listened to the right hon. Member for Leeds, East, both yesterday and today, I cannot imagine why. I can only think that the Leader of the Opposition was aware that he at least would be spared the onerous task of sitting through those pronouncements. How wise he was. I do not often feel sorry for the right hon. Gentleman, but, having heard the contrast between his laboured repetitions and the typically charming, entertaining, witty and effective comments of my right hon. Friend the Chief Secretary, it is hard for me to withhold a feeling of sympathy for the right hon. Gentleman.
Yesterday and today we heard much from the dedicated forecasters. Some of them are like the weather buff who, in the absence of a meteorological forecast,

would rather have an opinion from the gentleman who predicts the weather three months ahead by the state of his corns, than nothing. I share some of the agno-sticsism on the Treasury Bench about forecasting. I cannot help thinking that the Select Committee on the Treasury and Civil Service might occupy its time more usefully pursuing the suggestion made by the Chief Secretary, namely, that it might examine the relationship of the RPI and the balance between direct and indirect taxation.
My right hon. and learned Friend the Member for Hexham (Mr. Rippon) suggested yesterday that the Select Committee might investigate the financing of the nationalised industries. That is an important topic which the Committee could tackle. Unfortunately, I understand that such an investigation is not on its agenda.
Some aspects of the report are of great value. They have aroused some preoccupations, which many of us legitimately can share. They fall into three categories. First, they deal with the balance between the retrenchment in capital and spending over the past 12 months. Secondly, they deal with the turnround in the finance of nationalised industries predicted in the White Paper. Thirdly, they deal with public sector pay.
I was depressed to hear the Financial Secretary say last night that 60p out of every £1 that we had saved this year in the retrenchment programmes had been on the capital rather than on current account. I had hoped that we would manage to do better than that. We must try to ensure that we do not continuously achieve economies in service to the public while maintaining the intact armies of bureaucracy, or, in the case of local authorities, constantly expanding. There is much work to be done.
I come now to the turnround target in the finance of the nationalised industries. The Select Committee was sceptical about the possibility of its achievement. I have no doubt that the Government can do it, but I am a little preoccupied by some of the implications of the way in which it might be done.
It is fine to set targets for substantially higher prices in the nationalised industries, such as electricity, gas and telecommunications. However, the consequence is that those corporations will make substantial profits. What impact will that


have on wage bargaining within those industries? It is suggested that we can resolve that by draining off some of the surplus profit by taxation. Taxation for what purpose? If the taxation is to finance a run of 25 per cent. salary increases in the rest of the public service, that is a poor bargain.
That leads me to the question of public service pay. I listened with care and mounting alarm to what my right hon. Friend the Member for Worthing (Mr. Higgins) said about the relationship between pay in the public sector and cash limits. I understood that we had made it clear that the worthy Professor Clegg was not to be accommodated in full. Having listened to my right hon. Friend the Member for Worthing, and to the reply by the Financial Secretary last night, I am not sure. I am certain that if we are to bring a sense of realism into pay in the public sector it is essential to ensure that cash limits play the dominant role. Naturally, I do not believe for a moment that they can play that dominant role so long as the worthy Professor Clegg is around.
Read through the Select Committee report how one may, it is demonstrable that Professor Clegg does not fit. We should have got rid of him long ago. We must do so soon. In that context, I was delighted to hear the Financial Secretary say the other night that the Pay Research Unit is still in existence. We must examine it at the same time as we consider the future of the worthy Professor Clegg.
The key theme of the Finance Bill, rightly, is the need to bring down the level of PSBR in money terms. There has been much argument on both sides of the Chamber about the significance of reducing PSBR. I should like to throw one item into the pool of knowledge—perhaps I should say the pool of ignorance in relation to my remarks. I commend to the House an interesting paper by John Forsyth, which suggests that we need a rather steeper programme of reducing the PSBR in money terms, for two purposes. It is needed partly to sustain a background for reductions in interest rates, but primarily to achieve a lower exchange rate without inflation. That stands much of the argument on its head. There is no time to go into it, but I commend Mr.

Forsyth to hon. Members because his comments are designed to upturn a number of preconceived ideas.
My hon. Friend the Member for St. Marylebone (Mr. Baker) gently chided the Chancellor of the Exchequer for not bringing down the MLR. He said that it was a matter of judgment and not principle. There are grounds to welcome the marked and measured improvement in the monetary statistics. We recognise that they are coming back on the guide path set for them, and that is desirable.

Mr. Dalyell: On a point of order, Mr. Deputy Speaker. I am not complaining about the hon. Member, but are we or are we not operating under the 10-minute rule? I do not wish to cut short the hon. Gentleman but it would be helpful if we knew the rules.

Mr. Deputy Speaker: I thought that I had made it clear that we were observing the 10-minute rule but that it did not apply until 7 o'clock.

Mr. Bruce-Gardyne: I managed to get to my feet just before 7 o'clock, but I shall not delay the House for many more minutes.
At a time when we are running a substantial balance of payments deficit, we must pay close attention to the domestic credit expansion figures. As I said to my right hon. Friend during his opening remarks, I have always taken the view that we need to consider a whole amalgam of criteria for judging the movement of monetary policy. At a time when the deficit is substantial, the DCE figures are of great importance. Frankly, it does not make things better if there is excess credit from the Sheik of Abu Dhabi rather than from Mullins, the Government brokers. The result is the same—the credit is excess. For those reasons, I think that the time for a cut in the minimum lending rate is probably not yet entirely with us.

Mr. Deputy Speaker: Order. The hon. Gentleman has now had his 10 minutes.

Mr. Bruce-Gardyne: On a point of order, Mr. Deputy Speaker. We are getting into a muddle on this matter. I put it to you that I rose to my feet before 7 o'clock. I understood that under those circumstances the rule did not apply.

Mr. Deputy Speaker: Mr. Speaker has made the matter clear. The rule applies at 10 minutes past 7 o'clock, even to anyone called before 7 o'clock.

Mr. Bruce-Gardyne: I bow to your judgment, Mr. Deputy Speaker. However, I am bound to register the point that I find the operation of the 10-minute rule bizarre on an evening when we have a one-hour extension. I question, also, whether the rule has always been applied in the way that it has been applied this evening to those who speak before 7 o'clock. On that basis, I bow to your ruling.

Mr. Deputy Speaker: All that I have done is to announce to the House what I was instructed to announce by Mr. Speaker at about three minutes to 7 o'clock.

Mr. Tam Dalyell: To have but 10 minutes in which to make a speech concentrates the mind wonderfully. I wish to ask one economic question before turning to the details of the Bill. Have the Government made any assessment of the cost of sanctions against Iran? That sort of " gesture politics " can be extremely costly, and so can the threat of sanctions. Some of us will be asking these questions at 4 o'clock, 5 o'clock and 8 o'clock in the cold dawn of Wednesday morning. I think that it is legitimate to ask, here and now, what assessment the Treasury has made about the cost of the sanctions.
Some hon. Members have tabled a new clause, along the lines of the Government proposals on amnesty in Southern Rhodesia, proposing amnesty for the firms which transgress sanctions on Iran. Some hon. Members feel that applying sanctions is like letting kids loose in the signal box at Crewe, and will create chaos in the economy.
During the Budget debate the Minister of State, who is to reply tonight said
 I turn to the contribution of the hon. Member for West Lothian (Mr. Dalyell). I apologise deeply to the hon. Gentleman for being absent from the Chamber when he spoke. However, flesh and blood cannot keep one anchored in the Chamber for a full six hours, even when a debate of such compelling interest is taking place. Had I known that he was to raise issues of such great interest, I should have forgone my refreshment.

I seem to have the effect, whenever I rise, that flesh and blood compels the Minister who is replying to the debate to be out of the Chamber. However, the hon. and learned Gentleman said
 The liabilities are not agreed as punctually as one would like. I remind the hon. Gentleman and the House that most of the liabilities will be carrying interest at the rate of 12 per cent., which is not deductible for tax purposes.
I tried to intervene, but the hon. and learned Gentleman said
 No. I do not have time. The hon. Gentleman must forgive me. I have eight minutes in which to deal with an important debate and try to state the Government's position. We shall be able to return to these matters on Second Reading. I hope that the hon. Gentleman will acquit me of discourtesy if I pass on."—[Official Report, 27 March 1980; Vol. 981, c. 1783–4.]
In view of the 10-minutes rule, may I read into my speech what I said in the Budget debate on 27 March 1980, Official Report, c. 1741–4, on the so-called black economy, and couple it with a direct question? Do Government Ministers accept the figures given by the Inland Revenue Staff Association and the other Civil Service unions? I refer Ministers to a parliamentary question when I asked the Chancellor of the Exchequer:
 if he will make a statement on his discussions with the Inland Revenue Staff Association on tax fraud relating to between £5,000,000,000 and £11,000,000,000 of untaxed funds from the black economy.
The Minister of State replied:
 My right hon. and learned Friend has not yet had any such discussions, but we have seen the recent statements made by the Civil Service unions on the black economy.
I then asked
 Do they accept the figures in the question?"—[Official Report, 24 April 1980; Vol. 983, c. 680.]
I am now asking the Minister whether the promise that he made during the Budget debate will be honoured.
I wish to use my time to turn to the problems of what are undoubtedly the Government's favourite charities at the present time, namely, the British Olympic Association and the Central Council of Physical Recreation. I refer to a letter of 8 January, which the Treasury will take as read.
In 1976 the BOA was called upon to pay £2,900 in corporation tax, and on elements of its appeal, which related to all the promotional aspects of merchandising, and £9,812 in respect of VAT


reclaimed by the Government in respect of the cost of equipment and clothing provided for competitors at the Olympic Games in 1976 and the appeal expenses for the 1976 Olympics.
It was anticipated that under the existing taxation legislation the element of promotional income as distinct from donations would result in the BOA having to pay between £200,000 and £250,000 in corporation tax. With VAT now at 15 per cent., as against 8 per cent. in 1976, the amount that the BOA will have to pay in VAT will be about £20,000.
Regardless of Moscow—and we shall not argue that in 10 minutes—I wish to know whether, from a financial point of view, it is thought that sport is properly treated. The CCPR and the BOA take the view that a non-profit making distributing body, which has the public benefit purpose of developing and controlling a certain sport or recreational activity, should enjoy tax exemption. The bodies intended to benefit from such an exemption would be the governing bodies of sport and recreation, and the umbrella representative organisation of such bodies such as the CCPR and the BOA.
After taking counsel's advice, both organisations concluded that that objective would be best achieved by legislation that conferred tax exemption without charitable status. They suggest adopting the principle of section 362 of the Income and Corporation Taxes Act 1970, which confers exemption for scientific research associations. That considerably reduces the problem of definition, which would be inherent in any attempt to extend the existing heads of charity to include the encouragement of sport and recreation as an independent charitable object. Do the Government accept the thinking behind that view?
An amendment to the Finance Acts would be required. Subject to the advice of parliamentary counsel and following section 362 as a guideline, the CCPR and BOA suggested in a letter to Members of Parliament that the exempting section might read:
 (1) Where—

(a) an Association which has as its object the encouragement, development or control of any sport or other form of recreational activity (or which has as its object the representation of such Associations)

is approved for the purposes of this section by the Minister with responsibility for Sport and Recreation, and
(b) the memorandum of association or other similar instrument regulating the functions of the Association precludes the direct or indirect payment or transfer to any of its members of any of its income or property by way of dividend, gift, division, bonus or otherwise howsoever by way of profit,

there shall, on a claim in that behalf to the Board, be allowed in the case of the association—
(i) such exemption from tax as falls to be allowed under section 360 above in the case of a charity the whole income of which is applied to charitable purposes, and
(ii) exemption from tax in respect of chargeable gains.
(2) In section 248 of the Taxes Act 1970 " covenanted donation to charity " shall include a payment under a disposition or covenant made by a company in favour of an Association approved for the purposes of this section under subsection (1) above.
(3) The condition specified in paragraph (b) of subsection (i) above shall not be deemed not to be complied with in the case of any Association by reason only that the memorandum or other similar instrument regulating its functions does not prevent the payment to its members of reasonable remuneration for goods, labour or power supplied, or for services rendered, of reasonable interest for money lent, or of reasonable rent for any premises.
(4) In this section " recreational activity " means any activities in the fields of physical or cultural recreation conducive to the health of welfare to those participating in them.
The reason some of us have asked the Leader of the House—on 10 occasions the right hon. Member for Worthing (Mr. Higgins) and I have asked—for a debate on the Goodman report on charities is that we think that many of the definition questions should not be inextricably bound up with the Finance Bill but should be matters decided on their own merits. Indeed, as the Chief Secretary said, it is true that many of these matters are the responsibility of the Home Office.
It is all very well for the Chief Secretary to say that I should understand that we cannot discuss this on the Finance Bill. It is a heck of a pity that we have not discussed it out of context and out of Finance Bill season, because we ought to have done so. Nevertheless, the fact remains that we have not. The fact also remains that this is the only opportunity of airing serious grievances. I hope that in their general treatment of sport the


Government will not be unduly biased by their current quarrel with the British Olympic Association on something—the Moscow Olympics—which is rather different from the Finance Bill itself.
In this Finance Bill, taking into account the proposition which I read at great speed—which will be in print before we go into Committee—I hope that the Government will have a serious think about whether they can do something for sport, which has a very strong case. I hope that that case will be looked at. I shall sit down in the hope that something will be said in reply about my remarks about the black economy and the questions which I have put very legitimately, which ought to be answered on this occasion.

Mr. John Patten: I join the hon. Member for West Lothian (Mr. Dalyell) in the eccentric pursuit of actually trying to debate the Bill this evening. Very few hon. Members—one or two of my hon. Friends and almost none from the Labour Benches—have debated the Bill or any part of it.
I want to restrict my comments to the provisions in clauses 68 and 97 relating to fiscal reliefs for enterprise zones. I do not want to talk about the concept of enterprise zones at large because to do so would mean my straying out of order, as many of the provisions relating to enterprise zones will be affected by other Bills and provisions that are to be brought before the House. I wish to commend the Government for their enterprise in bringing these zones into being and also for having the foresight to be so experimental.
Enterprise zones are very important because they are experimental. They are experimental because, among other things, as the two clauses in the Bill show, they fiscally relieve burdens which would otherwise fall on firms setting up within enterprise zones. This is to be done through clause 68, whereby firms receive capital allowances on their new buildings, and through clause 97, under which a firm setting up in an enterprise zone will receive complete relief from development land tax.
Both of those provisions are admirable, but I wonder whether they go far enough and whether they are experimental enough. Capital relief on buildings is

a technique which has been long tried in development areas and special development areas in an attempt to lure firms to develop there. I doubt whether capital relief on new buildings will have much of an effect by itself, and I rather doubt the effect that it will have even in conjunction with the other provisions for enterprise zones.
On the other hand, the blanket provisions relating to relief from DLT are much more important and wide reaching. But I wonder whether the Government have been experimental enough in putting forward these provisions in the Finance Bill. It strikes me that in the six different enterprise zones which we understand are to be set up different techniques might have been tried in different zones to see whether they had more or less effect. I should have liked my right hon. and hon. Friends on the Treasury Bench to be more rather than less experimental.
In one or two of the enterprise zones, we could have perhaps declared a 10-year tax holiday to see whether that, with perhaps a fixed rate of tax for companies after that, would have had a greater effect. I am not saying that it necessarily would, but I am sure that my right hon. and hon. Friends on the Treasury Bench are also unsure about the exact result of the fiscal and other provisions for enterprise zones as proposed.
I believe that a 10-year tax holiday in one or two enterprise zones to see whether more firms could be persuaded to go in would have been beneficial for three reasons. First, it would be an instantaneously and easily understandable provision. It is easy to comprehend. It is the sort of thing which I believe many entrepreneurs wish to hear. Secondly, a 10-year tax holiday, perhaps followed by a stable tax regime, would probably promise the kind of stability which I believe many business men and entrepreneurs want in drawing up their investment plans.
Thirdly, I believe that through this device enterprise zones would not predominantly serve to attract capital-intensive manufacturing and other activities alone. I believe that that tendency has been one of the great defects of regional planning in the past, and I suspect that it may well be a defect in our present concept of enterprise zones. My hon. Friend the Member for St. Marylebone


(Mr. Baker), in his brilliant and commanding speech, clearly pointed out the importance of attracting and promoting the interests of service as well as manufacturing industries in the economy in general. That is just as much the case with regard to enterprise zones.
The concept of enterprise zones is a splendid one. But I do not believe that the provisions for fiscal relief go far enough or are experimental enough. Surely we need enterprise zones to be seen to be as successful as possible as soon as possible and perhaps to act as the grain of sand in a region in order to promote greater manufacturing activity as well as the service activity and the service industries which my hon. Friend the Member for St. Marylebone—who has now come into the Chamber—mentioned in his excellent speech.

Mr. Tony Marlow: Brilliant and excellent.

Mr. Patten: " Brilliant and commanding " was the term that I used earlier, to save my hon. Friend looking it up in Hansard tomorrow.
If we go so far as to promote enterprise zones, might not my right hon. and hon. Friends also think of extending that concept, particularly in the northern part of the country? There, when the economy gets going, there will be a much greater lag in the rate of development behind the South as there always has been historically since the 1920s and 1930s; the rate and nature of growth will be so much slower. There may be some sense in trying to extend the concept of enterprise zones into the concept of an enterprise region with similar provisions in one area of the northern part of the country in particular. That is an idea which I commend to my right hon. and hon. Friends.

Mr. Alexander W. Lyon: We have all been assisted by the Select Committee's report, both in our debate yesterday and in our debate today. One of the difficulties about serving on a Select Committee is that when it meets at 4.30 pm, one cannot be present for the opening speeches in the House. I apologise to the Minister if I say anything critical of the Government's attitude in the Bill

which he has already refuted, but earlier on I was dealing with matters in a Select Committee.
I am a little surprised to discover that our speeches are being curtailed to 10 minutes this evening, in view of the presence of so few hon. Members in the Chamber. However, I shall try to confine my remarks to 10 minutes.
I wish to make one point about a speech by an hon. Member who has now left, who complained about the work of Professor Clegg and his commission. It ought to be pointed out to Conservative Members that the upshot of those deliberations was to try to bring the pay of public service workers up to the level to which those in private industry had managed to push up their wages, despite the pay policies of successive Administrations. It cannot, therefore, be argued in the same breath that public service wages are a pacemaker for private sector wages. Equally, it cannot be argued that in all circumstances public sector workers are not earning by greater productivity, or by any other test, the increase in wages which they are claiming. It seems to me to be nonsense to argue against an incomes policy and at the same time to apply what is, in effect, a rough and ready incomes policy, through cash limits and by pressure on public sector wages, which is harmful only to those who are working in the public sector and not to those in the private sector. If the Government proceed—

Mr. Deputy Speaker: Order. I have some information which may be of assistance to the hon. Gentleman. I have communicated the position which appears to prevail in the House, and in the circumstances the 10-minute rule will not apply henceforth.

Mr. Lyon: This is the one and only time, Mr. Deputy Speaker, when any words of mine have had an immediate effect.

Mr. John Patten: On a point of order, Mr. Deputy Speaker. Does that mean that hon. Gentlemen called since 7 pm will now get a second bite at the cherry?

Mr. Deputy Speaker: No, we cannot read that into it.

Mr. Lyon: Perhaps someone should have complained a little earlier.
It seems to me that the Government's stance in protesting about an incomes policy and then applying one to the public sector workers will not continue for long without considerable protest from public sector workers, who are denied the kind of increases that are available in the private sector. I consider, therefore, that within a short time the Government will have come up with some kind of incomes policy. They cannot run away from it for the rest of their term of office.
Despite the fact that we are now outside the restraint of the 10-minute rule, I shall try to restrict the rest of my remarks to the detailed provisions of the Bill. I have two major issues—major, at any rate, to me and to my constituents—that I wish to raise. The first is a constituency point which I raise regularly on these occasions and which, in times past, has caused a certain amount of merriment among colleagues in the House. But any hon. Member worthy of his salt ought to keep on plugging away until the Government recognise the injustice that is done.
I refer, of course, to VAT on confectionery. When I have put the case previously, it has constantly been opposed by both Conservative and Labour Financial Secretaries, on the basis that confectionery is a notoriously bouyant industry and that mere changes in the tax on confectionery cause very little long-term damage to the industry. The experience of the last 12 months has been clearly against that argument, and I hope that the Financial Secretary will look at the effects on the confectionery industry of the substantial increase in VAT a year ago. It has had a damaging effect on an industry which, in every other way, has been exceptional in improving its performance in times when a good deal of British industry has been going downhill. It has also improved its export performance.
Financial Secretaries usually trot out the standard objection—they do not believe it, but it is put into the brief by the officials—that it is in the best interests of the health of the nation that people should not eat chocolates and sweets. However, the tax on confectionery hits not only chocolate and sweets, but a lot of convenience foods, which are the

most rapidly rising area of consumption within the food industry.
If I had a little more time I could advance the argument in greater detail—I shall no doubt get an opportunity to do so at some stage, either in Committee or on report—but there is now a good deal of medical evidence that the nutritional benefit of convenience foods is at least as high as that of a good many of the staple foods on which there is no tax.
When VAT was first introduced, the basic principle which was adhered to was that food would not be taxed. Unfortunately, it was breached by my own Chancellor of the Exchequer. We ought to revert to that principle now, on economic grounds, and on the general ground of principle that food should not be taxed in this country. In that way we ought to be able to fend off any future attempt by the EEC to harmonise VAT and increase the tax on food.
My second point is of more general importance and relates to acute injustice to a minority group in this country. I refer to clause 24, which is concerned with tax allowance for overseas children. As far as I am aware, the Government have not yet spoken on this clause. I read carefully the speech of the Chancellor in the Budget debate. There was no reference to it there. I cannot recollect any reference to it in any other speech in the Budget debate, but I may have missed it. I also missed the opening speech in today's debate. However, I hope that the Financial Secretary—or whoever is to reply to the debate—will say something about this because the issue is one of very considerable importance to a number of people in this country, most of whom are immigrants, and most of whom are from the Sub-continent.
The argument took place with the previous Labour Government about two or three years ago. They introduced a clause, which has been repeated in successive Finance Bills, which kept the allowance until an unspecified date. It has always been recognised that there would come a time when the allowance would cease, but that that time would be when those who had settled in this country had been allowed to bring their children here, or had come to a firm conclusion not to bring their children here.
When everybody had child tax allowance, those who were living in this country, working here and earning money here, were given the same allowance, even if their children lived overseas. When the new child benefit was introduced, it was a clear principle of that scheme—although not necessarily one that had to be adopted—that child benefit would not apply to children who were overseas, because it would be too difficult to administer.
It was recognised that an injustice would be caused to people who had recently come to settle in this country and had not yet brought their children over, but would in due course bring them here, because, just like their colleagues on the work bench, they would be earning money and they would be taxed on that money, and they would have children to maintain, albeit at a distance of several thousand miles. It was thought to be wrong that they should be robbed of child benefit for those children, and also that they should be robbed of the existing tax allowance, so this interim measure was introduced.
I recognise that it is an interim measure, but the Government, as I understand from clause 24, intend to reduce it this year and to cut it off altogether next year. I note that the Financial Secretary shakes his head. I hope that I may have an assurance that that is not what the clause means, but that is what I understand it to mean. I believe that the Commission for Racial Equality also understands it in the same way. [Interruption.] It seems that the axe will fall not next year but in two years' time.
If that is the position, it is still not possible to argue that the appropriate time has arrived, for this reason. There are in the queue, in India, Pakistan and Bangladesh, wives and families who have been waiting for a very long time to come here and who are delayed only by the slowness of the procedures that are applied in vetting their claims. At present there are about 24,000 people in that queue, and a good many of them are children.
It is one thing to say to people " You cannot have any form of tax benefit or tax allowance if you do not bring your children into the country". It is quite a different thing to say " By the way, you will not be able to get them into the

country when you want to because we shall hold things up by bureaucratic means ". That is what is happening now. We could clear that queue in 12 months if the Government were willing to take that number in during that period and if the Treasury were prepared to pay for the staff required to vet the applications in that 12 months. That could easily be done. I do not dispute that it might be the sensible thing to do, but since it will not be done by this Government, it is iniquitous that they are proposing to take away the tax allowance from people who cannot get into the country before the end of the tax year 1981–82.
In those circumstances, I protest strongly, and I hope that the Government will reconsider this matter in Committee. If they intend to reduce the value of the allowance—I dispute that—they ought to keep the allowance open until the queue has ended in India, Pakistan and Bangladesh. The Government could achieve that within the next five years even at their present rate of processing applications. However, five years means three years more than they intend under that rule.
I think that the Government, who have treated black people in this country so badly, are making the situation of those who do not yet have their children here a great deal worse. That iniquity should be ended during our consideration of the Bill.

Mr. Richard Page: During my brief contribution I wish to speak about the effects of the Bill on the area which I believe controls our future prosperity and wealth. I am talking about smaller businesses and the self-employed.
1 wish to talk about the way in which we need to increase the wealth of this country and not indulge in perpetual haggling about how to cut up the national cake and about who will get more or less of that cake. I am interested in the creation of wealth. If we bake a bigger cake, we can all have a bigger slice of it and a higher standard of living. It may be that when the pundits of the future look back, with the benefit of hindsight, and examine this Finance Bill they will discover in it the first real commitment by any Government to the smaller business sector of our economy.
In the past the Conservative Party has been without a central theme. We have tended to react to results. That is called management by disaster. We have waited for a crisis and then tried to react to it instead of sitting down quietly and planning an environment that will determine the events and the results.
I believe, that, thanks to my right hon. Friend the Prime Minister, we have now got back our philosophy and our belief and that that strengthens our commitment to the individual and to the smaller business. I welcome this Bill because it underlines that commitment.
I have always been amazed that we have allowed our new businesses to depend upon the innovative and creative ability of individuals without the active protection and encouragement of the State. I do not wish to wax too lyrical on this point, but if we take the example of the farmer we note that he does not look out of his window and say " I hope that there is a crop growing in my fields that I will be able to market." He goes out and ploughs and plants his land in order to produce the crops he requires. Similarly a mother nurtures her young and protects them until they achieve adulthood and can take their place in the world.
I am not impressed by the argument that smaller businesses are more competitive and more efficient and will, therefore, naturally survive. I know that the efficient ant of the smaller business, even if accidentally trodden on or squeezed out by the State rhinoceros, will end up in exactly the same position. There will be a squashed ant or a broken business.
Surely we must take active steps to create the conditions in which new business may start and in which small businesses may expand. For that reason, I am pleased by the proposals to create an environment for entrepreneurial enterprise. I am pleased particularly that there is to be tax relief on money borrowed so that the borrowed money can be invested or lent to certain close companies under clause 27. I am pleased at the removal of the requirement that the borrower should have worked in the company.
I hope that a roll-over provision can be considered similar to that which appertains for commercial premises. I should like to think that we could consider a

provision whereby a shareholder in a publicly quoted company could roll over his investment into a non-quoted company without being liable for capital gains tax. I hope we can do that because smaller companies require the investment.
I am most encouraged that in clause 36 there is a proposal to allow the offsetting of losses on subscribed shares in unquoted companies against income for income tax purposes. Additionally, there is the allowance of excess interest paid by close companies to directors or associates as a deduction for corporation tax.
All these proposals go a fair way down the path to creating the environment for the entrepreneur or for the person with a little spare capital willing to take the plunge and back a small company rather than leave his capital in more conventional sterile investments.
I succumb to the mood of the House in moving right away from this Finance Bill when I say that I hope that we can at a later stage take the steps to make it easier for people to move their investment in and out of close companies. By that I mean that I look for an amendment to the Companies Act 1948 to allow companies to purchase a percentage of their own shares. That would release people from a locked-in position and would enable them to invest with far more confidence and courage. They would know that if, for a variety of reasons, they needed to get their money out they would be able to do so.
I confess that I was somewhat disappointed not to see in the Bill the slightest hint of a movement towards the setting up of a loan guarantee scheme for smaller businesses. Such a support scheme would be extremely valuable in start-up conditions and the development of smaller businesses. Such a scheme is operated in practically every industrial country that is in competition with us. We should look seriously at the development of that form of investment in relation to our smaller businesses. It just could be that the clearing banks are already working on their own scheme. If they are, and if they introduced such a scheme, it would obviate the need for Government action.
Having gone part of the way down the path of providing the incentives to start and promote smaller businesses. I welcome the other half of the attack,


namely, the encouragement to provide new premises. I particularly welcome the imagination behind the creation of the enterprise zones as a way of bringing life and activity to some of our decaying city centres.
My hon. Friend the Member for Oxford (Mr. Patten) has already covered some of the principal points of this proposal. I know that the concept of enterprise zones does not satisfy the strait-jacket mentality of some Labour Members who believe that only by the injection of vast sums of public money can solutions be found. I must say to them that that mechanism has not been dramatically successful in rescuing a number of our traditional industries in the past.
I am sure that vast sums of public money injected into our city centres will not save the day there, either. What is needed is the combined efforts of many individuals. We need many grains of sand—handfuls of sand—working inside the city centres without hampering restrictions in order to raise the level of economic activity. In that way we can bring back life to those decaying areas.
I welcome the proposal to introduce the temporary 100 per cent. initial allowances on construction and improvement on small buildings of up to 2,500 sq. ft. In the past, we have tried to solve our problems by vast new advance factories and by large industrial projects. As we know from only too bitter experience, it requires a huge investment, it is high technology and it provides remarkable little employment at the end of the day.
It is the smaller business which must be promoted. It must be promoted in our councils and our districts. It must be promoted a little like the use of a greenhouse, to allow the plants, saplings and seedlings to grow there and, after they have been started, to be planted in the outside world. I hope that local authorities and similar bodies throughout the country will take advantage of this allowance and actively promote its use.
I should like to congratulate Hull city council on opening an innovation centre to help individuals who have new business ideas to bring them to fruition. That council has carried out the conversion of a warehouse in the city centre. The aim is to promote the formation of more smaller businesses and to create additional employment.

The idea is that by assessing these smaller businesses and giving them a start they can be got on their way. Then, at a later date, it is expected that the embryo business will move out into a small advance or nursery factory.
As I have said, one tends to keep moving away from the Bill, but I see the creation and the expansion of smaller businesses providing the one real employment prospect for the future, as our larger and more traditional industries continue to de-man.
In this area of the promotion of premises, I should like to mention one small difficulty that faces farmers in particular. If they have some premises which they would like to use, or to see used, for industrial purposes—I know that they must overcome the question of planning permission for their use, but assuming that that question has been overcome—they face the loss of certain agricultural grants in having such change of use, and that in turn is acting as a restriction. Some action should be taken whereby farmers do not lose out if they allow the conversion of their buildings to industrial use.
The smaller business sector already employs 6 million people. However, in relationship as a percentage to that of our industrial competitors, it is very small. Many times in the House the larger percentage of small businesses in Germany, some 40 per cent., has been cited, as have the activities of small businesses in Japan. However, I believe that this Bill, introduced by a Conservative Government, has taken the first major step down the path to giving active encouragement to smaller businesses to get going.
This can be regarded only as one of many steps that will have to come to increase their present contribution of 25 per cent. to our gross national product, because that is the only way that I see this country increasing its wealth, and, therefore, baking a bigger cake to provide better social services for our people.

Mr. James Hill: I should like to think that we are all in the same state of mind—that there is complete surprise here this evening at the lack of attention to this debate. After all, it is on the Finance Bill. The lack


of numbers on the Opposition Benches—

Mr. O'Neill: And on the Government Benches.

Mr. Hill: —and the apathetic approach that has radiated throughout the debate from the Opposition Benches must be a judgment that the Budget—reactions from one's constituency confirm this—did not harm, and in many ways surprised and relieved, the voters. In many cases, the surprise and relief was carried forward, because there were many other concessions in the Bill for which the public had been waiting for some time.
The only complaint that I have had from my constituency was from a pensioner who made the accusation that the Government would be paying the increased pensions two weeks late. Whether or not he has his sums right, I am sure that my hon. Friend the Minister will be able to say something about that this evening.
I do not look forward to any further reduction in the standard rate of tax. However, my hobbyhorse is that I think that domestic rates should be phased out, and with them the penal water service charges. Any Chancellor who can tackle in a workmanlike way the phasing out of domestic rates and water service charges, even if that is done over a long period, will earn the gratitude of the voters.

Mr. O'Neill: I accept the hon. Gentleman's point about the apparent offensive-ness of rating, but surely he must concede that, if we are to have local government expenditure, the money must be raised from some source, and that what he will have is not just the maintenance of the standard rate of income tax at 30 per cent. but an increase to cover the cost of that funding of local government expenditure.

Mr. Hill: No, I am afraid that the Opposition have got it wrong again. What I was saying was that if, at a future date—which one hopes will be sooner rather than later—the Chancellor is able to balance his books sufficiently to think of his 25 per cent. standard rate of tax, obviously the economy will be booming and there will have been a great deal more wealth-creation and investment— towards which this Budget will help. In

those circumstances I would not be alarmed if the Chancellor said " This year there will be no reduction in the standard rate of tax, but we can make our first impact on the phasing out of domestic rates."
Domestic rates are a form of penal taxation which is completely unfair. They hit those who are old and who live on their own. Also, as regards water service charges, I have no need to reiterate to my hon. Friends, or to some Opposition Members, the hardship that these are creating in many households. Having explained my hobbyhorse, I shall return to the Bill.
Two things about the Bill please me. The Conservative Party stands for a property-owning democracy. It is a party of wealth-creation. The Government have made two vital moves in the Budget. First, they have reduced the starting rate of stamp duty on conveyancing—perhaps only minimally, but, as with domestic rates, if the reduction on conveyancing fees on freeholds and leases can be made greater over the years, this will help towards a property-owning democracy.
In clause 26 there is a ceiling on tax relief on loans to borrowers to buy property from mortgage companies or banks which is at present £25,000. I wonder whether the tax relief on these loans could not be increased. It has remained the same for over six years. To keep pace with inflation, it would have to be nearly doubled now. Anyone who has attempted to buy a freehold or leasehold house in the London area will know that it is not possible to obtain any such property for £25,000. I know that there is an underlying political reason, but if we are to be true to our principles it is one aspect, along with stamp duty, that will have to attract greater relief in future.
Reference has been made to enterprise zones and the need to assist small businesses. My colleagues are completely for that approach, as I am. The only difficulty is that the proposed enterprise zones are far too large. The zones are not spread throughout the country. They will be sited in only six areas. They will be of such a size that they will take years and years to develop. The offset on the development land tax is all very well for the person who already owns the land, but what about those who are to move in?
Certain provisions for the enterprise zones will be worthwhile. My only hesitation is that they may create a " them and us " division among small businesses. They may create conditions that amount to a form of unfair trading between the small businesses in the zones and the businesses that for various reasons do not wish to move into them.

Mr. Richard Page: I appreciate the argument that my hon. Friend is advancing. I think that he will agree that there is a graduation of deprivation into the city centre. There is not a Berlin wall, where it is prosperous one side and chaos on the other. With respect to my hon. Friend, I think that he is a little too concerned about the difference in trading that will occur.

Mr. Hill: I was not talking about land mass. I was thinking of two companies, one in a zone and working well and another perhaps 50 miles away making exactly the same article. There may be a need to look even deeper into the formula for enterprise zones to ensure that we do not create two societies in small business terms.
I turn to the problem of losses on unquoted shares. Under clause 36, an individual will be allowed a deduction against income tax in place of capital gains where he realises a loss on unquoted shares in a trading company. That will be good for some shipping firms especially—namely, small, family, close companies. However, that applies to losses realised on or after 6 April. The shareholder has to be in good health and has to live after the holding of his shares. Obviously, no one lives for ever, and the shares will be passed on to a trustee. Would it not be possible to broaden the scope of the clause to include not only the shareholder himself, who is an individual, but a trustee of the individual's shares after his decease?

Mr. D. N. Campbell-Savours: Does the hon. Gentleman regard inheritance as an impediment to initiative?

Mr. Hill: Inheritance, for which we are all grateful, is generally an added boost to a person who has initiative. I speak for many small businesses when I say that they would welcome an inheritance

of a considerable size to help with their present business problems. Inheritance and initiative go together nicely. Inheritance without initiative is not a great deal of use. However, if a person has the two together, or even initiative on its own, he is in a most favourable position.
My right hon. and learned Friend the Chancellor of the Exchequer has set out the Government's proposals on capital gains tax. Only those who are not in a small company will not have heard of Lord Cockfield's review. My right hon. and learned Friend has obviously read it. He said
 I have had both proposals (indexation and tapering) re-examined but the conclusion to which I have come to is that both would result in an unwelcome increase in the cost of administration—for taxpayers as well as the Revenue—while reducing the yield of the tax to negligible proportions.
My right hon. and learned Friend has been wise. He has made out a first-class case for doing away with all capital gains tax—namely, heavy administrative costs and very little revenue. Why not get rid of the concept completely? Like my domestic rate hobbyhorse, I believe that the abolition of capital gains will have to be phased over a long period. It is obvious from my right hon. and learned Friend's words that he is of that inclination.
Capital transfer tax is penal. My hon. Friend the Member for Buckingham (Mr. Benyon), who is a farmer, has referred to the disastrous effect that it has on farmers in particular. It has a disastrous effect on most small businesses. My right hon. and learned Friend said:
 As I have already indicated, there have been extensive consultations on capital taxation before the Budget. We propose to continue this process. There are in particular certain specialised areas such as settled property which require very detailed consideration.
I am sure that that leaves the door wide open for a complete re-think on CTT and how it is affecting businesses, especially family businesses.
I am sorry to sound as if I am complaining, and I reiterate that I think it is an excellent Budget. It will provide interesting work for those who are selected to consider it in Committee. It is obvious that we shall have to change certain provisions. These will not be vast changes.
It will be obvious to any logical and commonsense member of the Committee that changes are necessary. For example, if someone does not pay his VAT on the due day, there is a £10 a day surcharge. That is a fine. I am sure that my right hon. and hon. Friends in the Treasury are not responsible for one provision in clause 14. I am sure that it has been slipped in without their knowledge. It provides that the penalty for overdue VAT after the enactment of the Bill will be ½ per cent a day.
The House will know that VAT is collected every three months. There can so easily be delay. For example, an employer may lose the girl who does the VAT returns. He may suffer a great amount of staff unrest. He may even have labour problems. The business that he is operating may become disastrously slow in preparing accounts. It is a fact that bad businesses exist.
If a person owes only £1,000 on VAT, it does not need any more than a child's mental agility to know that ½ per cent. per day over 90 days would be 45 per per cent. Forty five per cent. of £1,000 is £450. That would be the last straw that breaks the camel's back for the poor small business man if he got into difficulties. Admittedly the collector of taxes is responsible for putting most businesses into liquidation. However, if I were on the Committee, I should hate to think that I was responsible for adding support to a further penal sum.

Mr. O'Neill: Half a per cent. of £1,000 is £5. We are suggesting that we remove a daily penalty of £10. The proposal in the Finance Bill is lower than the present rate.

Mr. Hill: I have spotted an hon. Member who has not read the Bill. The Bill says £10 a day or ½ per cent., whichever is the higher. The minimum that the man will pay is £10 a day. I quoted £1,000 because it seemed an easy figure to base the calculation on, but the figure could be £5.000 or £10,000. At ½ per cent. over 90 days—three months—the penalty is £450 on an outstanding VAT bill of £1,000.
I know that my right hon. and learned Friend will tell me that action will be taken only in cases of great abuse by real rascals, but once in a while the net will pick up more than rascals. I merely

point out that in this almost faultless Bill there are one or two matters that should be dealt with in Committee. I hope that my right hon. and hon. Friends will note my unease. If I am fortunate enough to be on the Committee, I am sure that we shall be able to discuss the matter further.
I may have created the wrong impression. It is a fantastic Finance Bill. My constituency is an urban conurbation. Had the Bill been unfair, unjust and caused public resentment, my postbag would have been filled with complaints. I have had very few. It is a Finance Bill with which even the Opposition can find little fault. The imagination and futuristic thinking has reached almost beyond the realms of the Chancellor in matters such as enterprise zones, and my right hon. and learned Friend, his colleagues and the Treasury officials should be congratulated.

Mr. Ralph Howell: I congratulate the Treasury and the Government on much of the Bill. Bold steps have been taken, particularly with regard to de-indexing and the removal of earnings-related benefit. All hon. Members will accept that the Government are generally trying to control inflation. However, they are not concentrating sufficiently on measures to bring down inflation. We must concentrate more on incentives and getting the country working sensibly. That aspect of the Bill worries me.
Nearly all members of the Cabinet have at some time professed that they intend to solve the " Why work? " problem. Genuine attempts have been made to solve the problem of the poverty trap and the treadmill society, with which I have bored the House on many occasions. However, I cannot understand the Government's overall plan. Indeed, I cannot detect one.
Several measures have been proposed that will come into operation in 1981 or 1982 in regard to taxing short-term benefits. Taxing short-term benefits was never in my mind when I first talked of making State benefits and all income taxable. It does not make sense to deduct tax from benefits. If it is decided to give a man £20 in benefits and he needs that sum, it seems absurd to deduct tax. My point is that tax thresholds should always


be higher than the minimum income that the Government decide is right for those not in work or sick.
It is impossible to discuss the Bill sensibly without considering the wider proposals of the Social Security (No. 2) Bill and the Education Acts, which affect the total of spending power left in people's hands at the end of the day. There is no co-ordination between the Treasury and other Ministers who influence net weekly spending power—the money that people are left with after deduction of tax and national insurance and receipt of family income supplement and other benefits. A person may be paying £7 a week in tax and receiving £7.50 in family income supplement. That is a ridiculous situation and an awful waste of manpower, but is to be continued for a further 12 months.
The main reasons for the poverty trap and the " Why work? " syndrome do not appear to be fully understood by the Treasury. The first and most important reason for the poverty trap is our low tax thresholds. It is ridiculous to have tax thresholds below supplementary benefit and very much below family income supplement.
We then have a high initial standard rate of tax—the highest in the world. The first Budget did a little about that. I am bitterly disappointed that this Budget has done nothing. We shall never get out of these difficulties unless we cut income tax, particularly the initial rate, substantially.
Then there is the question of free school meals, which must come into this discussion. We have created the situation whereby anyone who is not on family income supplement or supplementary benefit will pay the full price for school meals. We have created a special category of people who, because they receive benefits from the State, are eligible for free school meals. We have created an extra poverty trap a little higher up. We have the ludicrous situation that a man with a wife and two children, earning £45 a week, will have a spending power of £54 a week after tax and national insurance have been deducted and benefits received. Yet if he increases his income to £65 a week he will find that he has only £52 spending power.
That unacceptable situation has come about for two reasons. One is the school

meals situation, and the other is the family support. We have made a big mistake. We have decided to hold down the increase to those who work to 11 per cent. and to increase family support to those who do not work by at least 16½ per cent. and, in some cases, by as much as 42 per cent. The " Why work? " syndrome was aggravated in the previous Budget. Now it has been still further aggravated. The Treasury team must think seriously about the matter. We are doing a great deal to ensnare people in the poverty trap.
I believe that the phrase " the poverty trap " is misused. It would be better to talk about the treadmill on which we find ourselves. I should like to give more figures. I am sorry to be critical of the Government, but I feel that I must make my views clear. When the Government came to office, the difference in net income for the average-sized family earning £45 a week or £85 a week was £15. In other words a family was better off by £15 if it increased its wage from £45 to £85. That meant a marginal tax rate of about 62 per cent. As a result of the last Budget, the gap was decreased to £8. The family was only £8 better off through earning another £40. Under this Budget, the gap will be reduced still further to £6. That not only discourages people from working and trying, but causes a big increase in unemployment.
When the Conservatives are in office, unemployment is a delicate issue. A Socialist Government can get away with 1½ million unemployed. The previous Conservative Government got into great difficulties when the figure reached 1 million. We shall experience great difficulties again when the figure reaches 2 million. There has even been talk of 2½ million unemployed. I should like to know what has happened to the CPS inquiry into the matter of false unemployment figures. The Government are liable to be criticised unfairly because many people are not genuinely seeking work.
It is high time that the unemployment figures were analysed again and a further study carried out to discover how many people are trapped into unemployment merely because of our totally chaotic, unco-ordinated taxation, welfare and employment systems. It is important that


this problem of the " Why work? " syndrome should be tackled effectively. The tinkering contained in the Bill will do nothing to improve the situation. It will do a great deal to make it worse. I hope that the Government will be able to accept some far-reaching amendments to correct the mistakes in the Bill.

Mr. Michael Spicer: I suspect that I am the only hon. Member tonight who regrets that he cannot hide the paucity of his thoughts behind the 10-minute limit on speeches. I intend to make more of an exclamation than a speech. Obviously I support the Finance Bill that gives effect to the Budget. I guess that the Treasury Bench agrees that the Bill is not a panacea but the beginning of a recognition that we cannot go on running a PSBR and borrowing and printing money at a rate faster than the nation can afford without experiencing inflation. One does not need to be a monetarist or a Keynesian to accept that.
I still wonder, looking at the two sides of the equation—the public expenditure side and the taxation side—whether it has been fully accepted what a difficult struggle lies ahead if the Government are to carry out some of the long-term policies to which they are committed. Some have been mentioned already. Although it was not mentioned in the Budget, my right hon. and learned Friend the Chancellor of the Exchequer has stated on several occasions previously that there is a commitment substantially to reduce the level of direct taxation. There is a certain amount of argument about it, but I understand that the commitment still stands. The figure that is constantly talked about, although not in the Budget, is a 25p basic rate.
My hon. Friend the Member for Southampton, Test (Mr. Hill) has mentioned the commitment to do something about domestic rates. If action is to be taken on rates, and if direct taxation is to be reduced without at the same time there being a rise in indirect taxation beyond acceptable levels, and if rates are not to be switched to some form of local VAT or local income tax, we are really talking about reducing taxation. My hon. Friend the Member for Norfolk, North (Mr. Howell) has raised the problem of the poverty trap

and the disincentive to work, which is recognised by many of my hon. Friends and, I suspect, by many Opposition Members. That also involves the immensely costly problem of the tax thresholds.
We have therefore three fundamental problems that would face any Government but which are particularly important for the present Government who are committed on all those fronts.
The other side of the equation is public expenditure. We still have a great problem there. I am sure that it is accepted by the Treasury Bench, though I am not so sure that it is accepted by the Conservative Party in the country or by the country at large. My hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) reminded us in his truncated speech last night that 60 per cent. of the cuts in public spending are on the capital side rather than on the current side.
All the evidence, including last month's manpower figures, shows that there is still an increase in the manpower recruitment of local government. The excuses of various local authorities are different. In Labour city areas the excuse is deprivation. Conservative rural areas, such as my own, argue that they are taking on all the people from deprived areas and therefore need more teachers, administrators and so on. Both types of authority have apparently foolproof excuses, and that pinpoints the Government's problem.
One of the marvellous aspects of the Budget speech of my right hon. and learned Friend the Chancellor of the Exchequer was its realism. I am sure that there is no sense of euphoria in the Government and I am concerned that on one side of the equation are fairly firm commitments by the Government radically to reduce taxation, while on the other side I am sceptical and worried, as, no doubt, are Ministers, about various aspects of public spending, particularly local authority spending, which are, to some extent, outside the Government's control.
I am therefore uneasy about some of the premises behind the Budget and some of the tax recommendations in the Bill. Above all, I am concerned that we shall live on the hope, which could be justified if the Government wished, of using


revenues from North Sea oil to bridge the gap. The price of oil is likely to continue to rise as the world economy picks up, barring major accidents in the Middle East, though such accidents tend to have a perverse effect on the price of oil, and our revenue will be substantial.
However, it would not be in the long-term interest of this country and everything that the Government are trying so wisely to do in fundamentally altering the structure of this country and the trend that it has been following if we relied in the short term on using North Sea oil revenues to plug the gap.
Of course, I support the Government's strategy. The measures in the Bill on the regulator and taxes are right, but hidden beneath the tip of the iceberg are many unanswered questions and many commitments by the Conservative Party, particularly in relation to the reduction of taxation, which mean that the hard men in the Treasury and the Cabinet must be supported and must stick to their guns.
The worst thing to do at this stage would be to fail to recognise that the Government are embarked on a hard, long-term strategy which is fraught with many more difficulties than is generally recognised. It would be wrong for us to be deflected from our present course or for us to raise too many expectations that the results can be swift. It is absolutely essential that we get across to the country what a difficult course we have set ourselves but how worth while will be the rewards if we keep to it.

Mr. D. N. Campbell-Savours: Thank you for calling me, Mr. Deputy Speaker, in this important debate. Perhaps it is sad that this evening there are not great armies of people in the House, but the country outside should recognise that many hon. Members made their statements either last night or luring the Budget debate. Not wishing to be repetitive, hon. Members would not wish to return to make similar state-menis.
Behind any Finance Bill there must be clear objectives. I regard this Finance Bill and the Budget Statement that preceded it from a constituency point of view. My constituents, as well as the

local authority staff who serve my area, the trade unions and local industry in West Cumbria, will all have looked at the Budget and will be examining the Finance Bill to see to what extent it may affect them. My constituency is in Cumbria, a region to which the provisions of the Finance Bill are of particular and great importance—especially those parts concerning unemployment, which is a major problem for us. At the moment we have record levels of unemployment. Indeed, in one town in my constituency the unemployment rate has increased by 50 per cent. since the general election of last year. The great majority of people place the blame firmly and squarely on the Government.
When the Government's expenditure plans for 1980–84 were published I made a point of taking the document to my constituency and consulting local industry, trade unions, and indeed members and officers of the local authority on the implications of that document to find out what their response was. That publication reveals that it is the intention of the Government to reduce expenditure on industry, which means industrial support, from £2·969 billion to £1·760 billion over the next four years. An equivalent reduction is to take place in housing support from £5·2 billion to £2·7 billion. Of course, there will be a smaller but significant reduction in expenditure on roads and transport from £2·975 billion to £2·7 billion. All those reductions have an effect on the construction programme and on the level of industrial support in those constituencies in the regions which have special problems of unemployment.
In addition to the problems that stem from those reductions in public expenditure, we have the statement of the Chief Secretary that it is his intention to reduce the level of output in the economy over the next four years by 6 per cent. All that is a recipe for increasing unemployment. That is the background against which my constituents are looking at this Finance Bill.
We felt that the Budget, and the Finance Bill following it, would provide some substitute measures to take care of the problems resulting from this strange industrial stratagem being pursued by the Government. We find that, despite the high levels of interest rates in the economy, there is no relief


against those high interest rates, no loan guarantee systems to help the small business sector, and no support for the principle—which I have advocated here on a number of occasions—of a regional development bank to lend to industry in the regions against a ceiling, on a basis of discounted interest rates dependent on the levels of unemployment. What we saw were measures which, in my view, have had absolutely no effect on small business and its development. I simply do not accept that we can solve problems by juggling round with capital transfer tax thresholds from £25,000 to £50,000, or lifetime and death transfers.
Inheritance is a positive impediment to the whole principle of initiative. I have always believed that inheritance impeded enterprise, the will of the people to get up and go, and make an effort and build. Perhaps this is strange from the mouth of a Socialist, but that is important if we treat the point of inheritance as a cut-off point in our philosophy.
I cannot see any benefit to be gained from increasing the £3,000 threshold for capital gains tax. What does that do for small businesses? How does that affect the production of goods, the resolve to go out and sell and market, the resolve to pursue good industrial relations to reduce industrial action, the resolve to go out and find export markets for our products? Silly things like these minimal and innocuous measures in the area of taxation have absolutely no effect at all.
There was one interesting item in the Budget, and that was the principle of enterprise zones. I can say—and I think it is well known in the country, as it is in the trade union movement and in our party—that there is some division on the Labour Benches and in the Labour Party in the country as to what our response should be to the whole question of these enterprise zones. I think that these reservations stem from the way that these zones were pressed upon the country in the form of the Budget Statement, because if we look at the small wording in the background notes and documents provided following the Budget Statement we find that the enterprise zones may well have the effect of attracting commercial as against—and I draw a very clear distinction here—manufacturing industrial enterprise.
From conversations I have had with a number of hon. Members, I think that the reservations on our Benches stem from the belief that these enterprise zones may well be turned into hives of speculative property activity. If we look at certain of these enterprise zones and where they are placed in the United Kingdom we see that there is a distinct possibility that they may in themselves and in their construction draw from other areas in the locality the kind of commercial activity which would inevitably take place within given urban communities, cities, or whatever it may be.
What I am saying is that the enterprise zones should have dealt exclusively with the promotion of manufacturing industry. If they had done that, I would have been willing to support measures, perhaps even of a taxation nature, to help those enterprise zones develop in the areas of crucial unemployment. I say that as an hon. Member of this House who comes from a regionally-based constituency with problems of heavy unemployment. If I am to see the problems in my constituency resolved, I must look without fear, favour or prejudice at any new idea that may come before this House which might have the effect of providing employment of a manufacturing industrial nature in my constituency.
So I think there is a positive argument for the enterprise zones, but it is a question of what they are by nature. I would have supported the principle of their being exclusively industrial and manufacturing. If they had been, I think the Government would have found it far easier to negotiate with local authorities on their placing; I think we would have found a far more mature debate developing in the country with trade unions as to their placing and what special incentives should be given in those particular areas.
I think also that those enterprise zones could have enjoyed other forms of aid from the State and the local authorities in addition to the taxation measures, which I would have been willing to support in the event that the zones had been of an exclusively manufacturing industrial nature. Other forms of support could have been included—for instance, support for trade exhibitions. The National Exhibition Centre in Birmingham could include units to promote industrial


activities in certain enterprise zones. Support for that sort of trade exhibition could come by way of Exchequer grant.
I would also be willing to support other forms of subsidy, particularly in energy pricing. The services of the nationalised industries could be subsidised to a greater extent in the regions, or in areas where we are trying to promote employment. Gas, telephone, and electricity charges could be subsidised by way of grants from the State to attract people to areas where work is to be found.
I look at the Finance Bill and the Budget Statement against that background. People in my constituency will not see anything for them in the Finance Bill and the Budget Statement, apart from a marginal reduction in income tax, in which the average family in my constituency will not be interested because all around them charges are rising and there is zooming inflation.
The next time the Chancellor comes to the House with a Budget Statement followed by a Finance Bill he will do well to look back at what I have said about enterprise zones and our problems in the regions. I hope that he will then make a special effort to include in his Finance Bill real, not artificial, measures that will create work. I spend most of my time in Westminster pursuing that simple objective.

Mr. John Brown: The Government's financial strategy is both realistic and bold. It is realistic, first, because it accepts rather than shields us from the awful world economic situation that all the industrialised nations now experience and have to survive in. Secondly, it accepts the chronically bad health of our British economy and industry. It accepts that there must be huge and dynamic changes in attitudes and habits if we are to achieve success. It accepts the pain and dislocation that those changes will cause.
The strategy accepts the need for a medium-term plan. For the first time in decades business men and entrepreneurs have been able to see a map, albeit a rough, unfilled map. The right hon. Member for Leeds, East (Mr. Healey) said that the map had a lot of holes in it.

I agree. But it is better to have a relatively accurate map with holes rather than one filled with inaccuracies and false predictions. British business men will welcome this financial and economic map of the medium-term plan.
The strategy is bold because it tries to make us face reality and the necessity to increase our self-reliance, not only as a nation but as individuals or companies. The strategy also accepts the pain of allowing us to wake up from the economic dream of past Governments, both Socialist and Conservative. The dream is of high living standards financed by Government subsidies. It is a dream about a lack of competitiveness in which we have relied upon a falling pound to insulate us from the facts.
Of course, there are exceptions, but industry generally has failed to design products that meet market needs. Industry has designed the products that it wishes to produce, not those for which the market is looking. We have failed to remain a country of high-quality production. We have failed to keep to delivery dates. We have been unimaginative in offering after-sales service to customers throughout the world. Instead, we have relied on lower and lower prices by means of a falling pound. Governments enabled that to happen because they have aided the falling pound. In short, the dream of low productivity and lack of competitiveness has been financed by inflation.
The Government's aim is economic recovery, net of North Sea oil. Their aim is to establish a manufacturing and technological recovery and to use North Sea oil as a valuable, god-sent, blood transfusion. The only way to achieve this recovery is for the Government to encourage a technological revolution. They must encourage a move away from old and dying industries and towards new industries—the high value added, technological industries. Today, Britain risks becoming an underdeveloped, industrial nation. But by experiencing a technological revolution it could become a developed, technological nation and thereby have a justified claim to a high standard of living.
We must make a huge psychological change away from old concepts, attitudes and habits. We must stop thinking merely about jobs and think about profitable


jobs. We must move away from thinking about production to thinking about selling. A satisfied production manager does not keep the country going, but satisfied customers do. We must move away from the concept of wages towards the concept of earnings.
The right hon. Member for Leeds, East made much play in his two speeches, today and yesterday, of the extent of Government cuts in relation to other Western nations. I do not dispute his figures. However, I must ask the rhetorical question: why does he find it necessary, when all Western nations are suffering the same basic problem of stagflation, to compare us with the rest? If we are to take a lead, we can make few comparisons because Britain will be one of the first countries to turn around, to enter new ground. The whole industrialised world faces stagflation. Nobody knows the answers. The Government are making a courageous and correct stand to beat it.
Opposition Members often portray the Government's economic policies as if they deliberately create, for their own sakes, rising costs of living, reduced services and increased unemployment. This is not true. No Government in their senses would adopt a policy that deliberately set out to create these things.
Right hon. and hon. Members must accept that the Government do not face a problem of either inflation or recession alone. The truth is that we face them both together—as I have said, stagflation. Unlike many of our competitors, we face these problems with an economy that in many key areas is both outdated and oversubsidised.
Inflation and recession are both great evils, pulling in opposite directions. They cannot possibly be hit together. A decision had to be made by the Government as to which of those two great evils was the worst. I believe they were correct in saying that, in a modern developed country which still enjoys not the best but a relatively good standard of social services, inflation was a greater evil than recession.
The Government set out, first, to control and, secondly, to beat inflation, which was very painful, especially in a world climate of recession. Many past Governments, both Socialist and Conservative,

have tried to beat inflation but with no real, lasting success. Some Governments flirted with monetarism, but none have had the courage to see it through. The Government have adopted a policy of monetarism, and I think that they can, and will, carry it through.
The key policy of this form of monetarism is to cut Government spending. I believe that that is correct in the present circumstances but, as I said, very painful. Cutting Government spending means reducing Government subsidies and, therefore, the apparent cost of living will obviously rise. We must accept that, for the past two decades, we have been living well beyond our means. A cut in Government spending also means a cut in services, especially if Government and administrative bureaucracy is not cut in the early stages, which regrettably is still the case.
Of course, such cuts in Government spending result in increased unemployment. Here we should face an important semantic question. People say that monetarism creates unemployment. I believe that that is a wrong use of the word " creates". In truth monetarism " exposes " latent unemployment. It does not set out to create unemployment. Its effects show where unprofitable employment exists, and thereby exposes latent unemployment.
Now I wish to say a brief word about local government financing. I believe it is wrong for the Government to concentrate merely on local government spending. We should concentrate very much more on local government borrowing.
Now may I refer to a remark made by my hon. Friend the Member for St. Marylebone (Mr. Baker)? He referred to the undesirability of high interest rates. I agree that high interest rates are dreadful. They are a penalty, unfortunately, and the sooner we reduce them the better. The Government do not allow high interest rates because they want them, but because they are a realistic market factor. I wish to reassure my hon. Friend that high interest rates are not all bad. They help to create a strong pound. A strong pound is important because it forces business men to concentrate on the product mix—designing the correct products, delivering them on time, building them to the required quality, and giving


after sales service. We get away from the dreamland of a falling pound.
Furthermore, high interest rates that are higher than the rate of inflation—which may soon happen—create a negative carry between the cost of money and the increase in the price of goods, and are anti-inflationary in that respect.
In summary, I believe that the Government's financial policy is very tough and that it will remain so for quite some time, perhaps two years. However, I believe that it is necessary and long overdue. It is realistic and bold. However, many of my hon. Friends may disagree, even some of my right hon. Friends such as my right hon. Friend the Member for Taunton (Mr. du Cann). I agree with him that the Government's predictions with regard to unemployment may be too low. I think that it will be higher. I also agree that the Government's predictions with regard to manufacturing production are too low. But in order to restore economic sanity we must operate. Many people in the country may say that such an operation is too severe and that we risk killing the patient. But they must accept that the British patient is already dying economically.

Mr. Campbell-Savours: Mr. Campbell-Savoursrose—

Mr. Browne: I am sorry, but I cannot give way, because I am already running over time. I believe that economically the British patient is already dying. It is, therefore, vital that the Government operate, and do so now with conviction, using North Sea oil as a God-sent blood transfusion.
May I advise my right hon. and hon. Friends " For God's sake hold on ". Above all, please do not allow us, the British patient, to wake up in postoperative agony and pain to find that our Ministers opened us up, got so scared by what they saw that they just sewed us up again and left us with all our old ills. Please, please hold on.

Mr. Ernie Roberts: I shall only say a few words, because time is running out. I should like to refer to what the hon. Member for Winchester (Mr. Browne) said about the British patient dying economically. He is right, and the Government

will be culpable of murder when he dies.
The aim of the Bill underlines the Government's intention to endeavour to manage the economy by what they call monetary policy. I have had occasion to look at the remarks of someone who is certainly not a member of the Labour Party. I am referring to Ronald Butt, the political editor of the Financial Times, who says some interesting things about the Government's so-called monetary policy. He makes it clear that
 means have not yet been found of measuring either the supply of money and credit or its velocity of circulation as effectively as they would like.
Mr. Butt also shows that the very policies which the Government are adopting are self-defeating. He states:
 What is more, the 17 per cent. MLR is in one sense self-defeating, since it actually increases public spending on servicing the national debt,"—
and everyone knows how high that is and what a tremendous burden it is upon our economy—
 as well as inhibiting industrial investment, reducing employment, causing business bankruptcies and hitting individuals with mortgages.
That is what that economist has to say about the Government's so-called monetarist policy.
As we know, the Government are raising about £73,000 million from the people. The majority of that burden is being put on the backs of the ordinary people. In fact, about £60,000 million is being extracted by the Government from the majority of the working people, through PAYE, indirect taxation, such as VAT, smoking taxation, drink taxation and taxes upon other goods and services which ordinary people require in order to live.
I repeat that this taxation is being paid for mainly by the ordinary people of this country. It is not the taxation of the poor rich, but the taxation of the poor poor of this country. They are the ones who bear the burden of taxation. The more that that is said, the better it should be understood. They are faced with a massive burden of interest payments. About £10,200 million in interest payments has to be found by the people of this country. That is the result of the monetarist policies being pursued by the Government.
The burden of taxation upon the rich has been reduced by the Government in the last Budget, and so the burden of the country's needs obviously has to fall somewhere. If the rich do not pay, the ordinary people must pay, and they are the people who are paying the costs of running this country and of meeting the nation's expenses.
There is a need to thrust the burden on to the backs of those who are best able to pay, and those who are best able to pay are those who are taking the wealth out of this nation. They are the people upon whom a just tax known as a wealth tax should be placed. It should be based on the criterion of their ability to pay—and to pay their share. That is what the Government are not doing.
I should like to end today, as I did on Friday, with a quotation from a well-known Tory—Churchill. He said
 We know what to expect when the Tories return to power—a Party of great vested interests banded together in a formidable confederation; corruption at home, aggression to cover it abroad, the trickery of tariff jiggles, the tyranny of a well-fed Party machine; sentiment by the bucketful, patriotism and imperialism by the imperial pint; an open hand at the public exchequer, an open door at the public house; dear food for the million, cheap labour for the millionaire That is the policy which the Tory Party offer you.

Mr. Denzil Davies: This is the second Finance Bill that the Government have introduced in this Session since taking office. A few days ago Ministers were celebrating what they like to call the anniversary of the Government's election. I should have thought that for most people in the country a wake would have been more appropriate. The Prime Minister is supposed to have said that she was proud of her Government's record. I suppose she would say that, but we would like to know what the Government have to be proud of in terms of their economic record.
Between the time of the first Budget and this second Finance Bill, the Prime Minister and her Chancellor of the Exchequer and Treasury Ministers have presided over an alarming and rapid decline in the economic fortunes of this country. As we have heard in the debate, inflation, which was running at about 10 per cent. in the 12 months prior to the Government taking over, has doubled, and when the

latest RPI figures are announced it is likely to be running at over 20 per cent.
These are the Ministers who, in the past, have had the effrontery to make speeches on the need to restore sound money to the economy. Unemployment, which was falling at the time of the General Election has gone on an alarming upward trend. Even the Government, in the Red Book, based their calculations on an unemployment level of 1·8 million. Some forecasters say that it will go as high as 2½ million. I do not think that even the Chancellor or Treasury Ministers would deny that it is likely to reach 2 million before long.
Economic growth has come to a shuddering stop, and the fall in output, especially in manufacturing industry, is likely to be the greatest fall since before the last war. Manufacturing output in 1983 is likely to be lower than it was last year. Interest rates are at a record level and business confidence is at a record low. Perhaps, against that background, the Minister of State will tell us what on earth the Government have to be proud of in relation to their economic policies.
It was all going to be so different. The tax cuts announced in the last Finance Bill were supposed to rejuvenate the British economy and galvanise the mythical entrepreneurs of Tory folklore. Apparently the measures were to no avail, because the economy in 1983 will be in an even worse state than it is now.
Perhaps the Treasury should set up one of those independent committees with two Treasury civil servants and, perhaps, two people from Lazards bank in New York to monitor the performance of these entrepreneurs and if performance did not match up to financial benefits perhaps the tax could be taken back from the entrepreneurs.
Many of the provisions in the Bill reflect the deteriorating course of the economy during the Government's year in office. One could say that parts of the Bill could be described as an exercise in damage limitation. Unfortunately the damage has been so great and the limitation has been so little and so late.

Clause 21 deals with tax allowances and fully indexes personal allowances to the rate of inflation. But, as the Chancellor said in his Budget speech, because the reduced rate band has been abolished,


the actual increase in allowances is 11 per cent. and not the full rate of inflation. All kinds of justifications have been advanced for abolishing the reduced rate band. We are told that it helped young people and women in part-time employment only. They, it seems, do not merit any special help from the Government.

We have been told that, by abolishing the reduced rate band, we can reduce the number of civil servants. Yet this Government are prepared to take on thousands of extra civil servants in order to hound those unfortunate people who live on social security benefits. The real reason why the Government have abolished the reduced rate band is that they could not afford to index tax allowances fully because of the higher rate of inflation. It would have been embarrassing for Treasury Ministers, having supported, condoned and connived at the Rooker-Wise amendment, to come to this House with the necessary order to break the link between prices and tax allowances.

Therefore, thousands of taxpayers will now be paying tax at a higher marginal rate because of the cowardice of Treasury Ministers and the need for them not to lose face by having to come to the Dispatch Box and break that link.

Had the Government, since coming into office, made the fight against inflation their main priority instead of constantly putting up prices, the inflation rate need not now be running at more than about 12 per cent. The Government could then have indexed the personal allowances fully to the retail price index and they could also have retained the reduced rate band.

The Chief Secretary referred to those clauses which are meant to help small firms. We welcome any help for small firms and small industries, but we shall look at the details of the clauses and especially at the possibility that some of them might be used for tax avoidance. But in general we welcome the help the Government propose to give. However, one must say that these clauses will be wholly ineffective compared with the enormous damage which this Government have already done to small businesses. More and more small firms are being crippled by the Government's fiscal and economic policy and not only by high interest rates and high inflation.

Cuts in public expenditure will bankrupt many small businesses. If we are to believe the public expenditure White Paper there are likely to be very few, if any, council houses built in Britain over the next three years. If that is the case how many small builders will be put out of work?

The Chief Secretary to the Treasury waxed lyrical about the measures in the Bill but as a result of them many small firms will be bankrupt before those measures become law in August. Quite a few other small firms will never make the profits to enable them to take advantage of the benefits provided by the Bill.

We shall wish to debate the provisions creating the enterprise zones in detail in Committee. Clause 68 and the Government's proposals for enterprise zones reflect their extraordinarily muddled thinking about the economy. The Government create a slump by cutting public expenditure by their excessive, over-tight monetary policies. They damage the prospects for investment by high interest rates, and then they set aside a few miserable acres—many of them derelict acres and many in areas which have been made derelict partly by the Government's own economic policies. Then they hope and believe that somehow jobs can be created in those areas, that factories can be built and that investment will take place, against a background of slump and depression. That shows how extraordinarily simple-minded the Government are in their economic policies.

Ironically, the only section of the British economy which is benefiting directly from Government action is not covered at all in the Bill—not covered specifically, anyway. That is the banking section. The banks are just about the only sector that is actually making large profits—and this directly as a result of the Government's monetary policies.

The Government could easily have included in the Bill a clause to impose an excess profits tax on the banks. If five Treasury Ministers—one of them sitting Buddha-like in the House of Lords thinking great thoughts—with the whole power of the Inland Revenue behind them, cannot think of a way of taxing the excess profits of the banks, Opposition Members must conclude that the real reason is not the complexity of doing


that but the fear of offending the Governor of the Bank of England and the City of London. I for one do not believe that we shall ever see a clause in this Finance Bill, or in any Finance Bill from a Tory Government, imposing additional taxes on the banks, because in my experience Tory Governments do not put extra taxes on the profits of their friends and supporters.

By not additionally taxing the banks the Government are going against their own monetary policies, because, having provided the banks with the extra profits, they are increasing the lending base of the banks, and the banks are able to lend more money. Therefore, if the Government want to reduce bank lending if this affects inflation, one way of doing it is by additionally taxing the banks.

This Bill cannot be looked at in isolation from the Government's other policies, as I think the Chief Secretary said, because decisions about taxation in the Bill are governed by public spending and by the level of the PSBR. Therefore, decisions about those factors also affect the taxation provisions of the Bill. The Opposition say that this Bill and the other measures which go with it will not do anything to solve the three problems of the British economy. The three problems are a high level of inflation, high and increasing unemployment, and the growing and rapid disintegration which is taking place in our manufacturing industry and our manufacturing base.

We are constantly told by Ministers that the defeat of inflation is the Government's main priority. If that is so, the Government have failed lamentably over their first year in office, because in that year inflation has doubled. But the truth is that over their first year in office, whenever the need to keep down prices has come into conflict with the prejudices, the dogmas and the ill-thought-out theories of the Conservative Party, the need to keep down prices has had to take second place. The Government came into power with a naive belief that our economic problems could be solved somehow by cutting income tax, but when it was shown that that was very difficult to do without raising indirect taxes, they put up prices. The RPI was put up by 4 per cent. in order to cut income tax. Therefore, the need to keep down prices was made one of secondary importance

to the Government's wrong belief that somehow cutting taxes for the rich would solve the problems of the British economy.

The same goes for public expenditure. The extraordinary White Paper which the Government produced last November said that public expenditure was at the heart of the problems of the British economy. That was a completely bald, unsubstantiated statement. No evidence was produced to support it. Treasury Ministers have tried to suggest that, somehow, high levels of public expenditure cause inflation. They have never proved that or produced any evidence for it. But the monetarists' view of a connection between public expenditure and inflation somehow fits in quite nicely with dogmas and prejudices of the Tory party regarding public expenditure.

Friedmanite theories and Tory prejudice provided an excellent opportunity to try to cut public spending. However, when the Government came to try to do so, they found that it was not very easy. They took the easy way out. They increased prices. Likewise, they increased charges. We saw increases in school meal charges, prescription charges, council house rates and electricity and gas prices. All these charges were deliberately increased to reduce the level of public expenditure. The public expenditure plans for the next three years are even more dependent on increasing charges and prices, especially nationalised industry charges and local authority rates.

If high levels of public expenditure cause inflation, how can inflation be reduced by cutting public expenditure and increasing prices? That is what the Government are trying to do. If the proposed increases are reflected, as they will be, in wage settlements, the outcome will be doubly worse. If, some time next winter, during the next wage round, the Government have to introduce a wage freeze, I hope that they will not try to make the trade union movement the scapegoat of that policy. The real reason for the introduction of a wage freeze will be the failure of the Government in their first year of office to use all the weapons at their disposal to keep down the rate of inflation.

Clause 23 deals with indexation. First, it tidies the drafting of the Rooker-Wise


amendment We do not object to that. Secondly, it seeks to extend the Rooker-Wise amendment to give the benefit of automatic indexation to the higer rate bands and investment income. We shall oppose that in Committee. As the clause deals with the retail price index and links allowances to the index, I hope that the Minister of State will give us some idea of what the Government think about the level of the retail price index towards the end of this year and next year.

In the Red Book we have the forecast, or assumption—one has to be so careful these days about the words that one uses—of 16½ per cent. No one believes that any more. No one believes that at the end of the year inflation will be running at 16| per cent. It will almost certainly be slightly below 20 per cent. It was reported recently at the London Business School that there will be an inflation rate of 16½ per cent. at the end of 1981. If that is so after all the misery caused by the Government's policies, and if all that they can achieve by 1981 is a 16½ per cent. rate of inflation, the sooner they change their policies or get out of Government the better.

I am sure that the Chief Secretary, being the honest Shropshire lad that he is, will say that he does not know what the rate of inflation will be in a year's time. He may say that he does not know whether the Government's policies will work, but he will not say that in those terms. He will use language that is not typical of him. He will say, for example, that there is no mechanistic link. He normally does not use that bureaucratic jargon. I do not blame him for saying that he does not know, because I do not know what the rate of inflation will be in a year's time either. It is possible to forecast for three months or for six months, but not any further. The Financial Secretary and the Chancellor, or the Government as a whole, have no idea what the rate of inflation will be in a year's time. What is more, they have no idea whether the Government's policies will reduce inflation.

As I have said, I do not mind the Chief Secretary saying that he does not know, but it is not right for the Govern-to base their policies on closing factories and putting people out of work when

there is no evidence and no knowledge of what will happen in a year's time. The Government have no idea of the consequences of the policy that they are pursuing.

Mr. Richard Page: What is your policy?

Mr. Davies: Speeches have been made about the benefits to small businesses of the provisions in the Bill. However, the avalanche of unemployment which the Government's policies have created will not be mitigated by the Bill. Indeed, as I said, the Government's assumption is that there will be 1·8 million unemployed before long. According to the Financial Secretary, if unemployment increases beyond 1·8 million—and I believe that the Treasury Select Committee feels that it might be 2 million or more—public expenditure may have to be cut further to pay for the extra social security benefits. The Treasury witness before that Select Committee said that national insurance payments would have to be increased to pay for those extra benefits. Whether public expenditure is cut further or national insurance payments are increased, there will be further deflation of the economy. We shall have unemployment and more deflation, followed by more unemployment and yet more deflation. Large sectors of industry will disappear as a result.
It has become increasingly obvious, on a careful reading of Ministers' speeches, that the Government's main weapon against inflation is unemployment. They hope that fear of unemployment will force people to accept wage increases lower than the rate of inflation. The Chief Secretary said as much when he talked of three years of unparalled austerity. If the Government's policies are to work, we shall have three years of unparalleled austerity and unmitigated disaster.
The Government like to portray themselves as not interfering with the free play of the market forces. Not for them the old-fashioned policy of demand management—of manipulating demand in the economy. Stripped of their spurious Friedmanite jargon and monetarist theories the Government are interfering in the economy by trying to reduce demand through unemployment, cutting unemployment benefits and, they hope, reducing wage increases and cutting public


expenditure. That is no different from the old-fashioned policy of deflation and reducing demand in the economy. The Government believe that inflation is caused entirely by demand. That is where the problem begins.
It is doubtful whether the Government's policies will work. I do not believe that they will substantially reduce inflation, and the Chief Secretary does not know. Even if the rate of inflation were substantially reduced, the price would be too great—the destruction of large sections of British industry and unemployment for too many people. Inflation and unemployment are twin evils. The Government should not use unemployment to try to defeat inflation.
In Government we were lectured by. Opposition spokesmen about the need to improve the supply side of industry. We were told that incentives should be given to the skilled worker and middle manager. I accept that premise, but the reality of this Government's policies are different. Neither the skilled worker nor middle manager has benefited from their two Finance Bills and Budgets.
A person earning £5,000 a year—and I assume that a skilled worker will earn about that—[HON. MEMBERS: " More."]—Perhaps, but that does not make a difference to the figures. As a result of the Government's policies, a person earning £5,000 a year will benefit by about 50p a week. A person earning £10,000 a year—a middle manager in an engineering firm—will benefit by only £1 a week, and that is before taking into account increases in mortgage interest rates, local rates and so on. The only people to benefit from the two Finance Bills are those earning in excess of £15,000 a year, and those who have benefited most earn in excess of £25,000. The incentives have not gone to manufacturing industry. Because of our salary structures, in the main those who have benefited are in the banking sector, the professions and the higher echelons of the Civil Service. Manufacturing industry has not benefited. The position is made worse by the present wage round. The highest earnings will have been earned by those not in the manufacturing sector. They are doubly penalised. They get fewer benefits from tax relief and fewer incentives in terms of higher wage increases.
In one of his many speeches to women's institutes and chambers of commerce recently, the Chancellor was reported to have mentioned the battle of the Somme. I am sorry that the Chancellor is not here, but he will no doubt read my remarks in Hansard tomorrow. I can only say that this Government and Ministers should avoid using First World War analogies. If the Government continue with their economic policies, the Chancellor and this Government will soon do to the British economy what Field Marshall Haig did to the British Army. If they commit increasing sectors of British industry to the quagmire of antiquated economic policy, it will take a generation at least for the country and the economy to recover. Because of the economic carnage and the social consequences and the social deprivation that will follow, we shall be voting in the Lobby against the Bill tonight.

Mr. Speaker: Mr. Peter Rees.

Mr. Bruce-Gardyne: On a point of order Mr. Speaker. I apologise to my hon. and learned Friend the Minister of State. I did not want to interrupt the right hon. Member for Llanelli (Mr. Davies). I felt, however, that I should raise with you as soon as you resumed the Chair a matter that I consider of some significance to the House as a whole.
The House in its wisdom or, as I believe, in its folly, decided to initiate a rule of 10-minute speeches and gave you discretion to decide when the rule should apply. You announced at the beginning of this afternoon's discussions that you might be minded to invoke this rule at 7 pm. After you had left the Chair, at 6.50 pm, Mr. Deputy Speaker, on your instructions, informed the House that the 10-minute rule would apply. Subsequently, I understand, the 10-minute rule was revoked.
I venture to suggest that if the 10-minute rule had been applied throughout, the summing up speeches would have begun at 8 pm, the vote would have been taken at 9 pm, and the usual channels might have been somewhat inconvenienced. Furthermore, the point that seems to me of greatest concern—

Mr. Speaker: Order. Perhaps the hon. Gentleman will give me a point of order


on which to rule. He has not done so yet.

Mr. Bruce-Gardyne: I am sorry, Mr. Speaker, but if this is not a point of order, I do not know what is.[HON. MEMBERS: " Oh ".]

Mr. Speaker: Order. The hon. Gentleman is making that clear. He must give me a point of order relating to our Standing Orders on which to rule.

Mr. Bruce-Gardyne: I will, indeed, Mr. Speaker. The point of order that I wish to put to you is this: I understand that, under our Standing Orders, this evening's debate is open-ended; that the rule is automatically suspended. The point of order that I wish to put to you is that if the 10-minute rule—I accept entirely that the House in its wisdom gave you total discretion—is to apply when the rule on sittings is suspended, how many hon. Members are to be called to complete the debate? We can go on—

Mr. Speaker: Order. The hon. Gentleman has made his point quite clear. Those hon. Members who were in the House this afternoon heard me say that I proposed to exercise the 10-minute rule at 7 pm. I also said that, if necessary, we could cease to operate it. The message that came to me was that it was not necessary. I sent a message to the Deputy Speaker asking him to relax the rule. I can see no reason for the hon. Gentleman to feel indignant. It was in the interests of fairness and with no desire to hurt any hon. Member. I had no wish to hurt the hon. Gentleman in the application of the rule.

Mr. Bruce-Gardyne: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. If the hon. Gentleman wishes to pursue that matter, perhaps he will do so tomorrow morning when I take points of order. I believe that the Minister should now be allowed to speak.

Mr. Bruce-Gardyne: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. I am not dealing further with that question tonight.

Mr. Bruce-Gardyne: I think that it is intolerable.

The Minister of State, Treasury (Mr. Peter Rees): When Labour Members were in government, the Second Reading debate on the Finance Bill tended to be treated by them as an occasion for a rather dry exposition of the provisions of the Bill. It was usually the melancholy task of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) to give a lucid, but rather sad, analysis of the fiscal provisions that he had to introduce.
Sometimes we were lucky to have the charm and sparkling wit of the right hon. Member for Heywood and Royton (Mr. Barnett), but I rarely recall the right hon. Member for Leeds, East (Mr. Healey) making a personal intervention. Tonight we have had, for the second day running, a contribution by the right hon. Gentleman, though he was not in what Lord Lever used to describe as his normal ebullient form. In fact, his contribution was a rather funereal dirge, a sort of economic " Abide with me ". It cast a slight pall over the subsequent debate.
I contrast the right hon. Gentleman's speech with the livelier, more sympathetic, wittier and more perceptive contribution of my right hon. Friend the Chief Secretary. It is not for me to speculate on why the right hon. Member for Leeds, East should have made two speeches in two days or on the impact that may have been made on the tiny Chinese minds of his hon. Friends below the Gangway who are so noticeably absent. That is a matter for him and them to discuss. Perhaps the right hon. Gentleman felt that he did not do full justice to his case in his 50-minute speech yesterday and that he needed another 40 minutes today—a sort of " Apologia Pro Vita Sua".
As my hon. Friend the Member for St. Marylebone (Mr. Baker) pointed out in his perceptive speech, we were left singularly uninformed about what the policies of the Labour Party are or would be, if, against hope and expectation, it were returned to power. Although the contribution of the right hon. Member for Llanelli (Mr. Davies) was more graceful because it was more Celtic, even he left us in singular doubt. Neither right hon. Gentleman was in his most ebullient form as they contemplated the ruin of their past policies. Obviously they cannot come to grips with the problems with which they have left us.
Perhaps the most significant questions put to me by the right hon. Member for Leeds, East concerned the forecasts about oil revenues. Of course, that must be a matter of considerable doubt. The right hon. Gentleman will appreciate that it is virtually impossible to forecast what the world price for oil is likely to be over the next three or four years. He will know the difficulties of forecasting the exchange rate and he may be aware of the difficult physical factors.
The House will know that there has been a record of slippage in this area which would make it extremely rash for any Government, even one presided over by the right hon. Member for Leeds, East, with his robust optimism and cavalier disregard for the facts, to make forecasts. We have approached this problem with a little more humility and circumspection.—[Interruption.] I am indeed glad to have encouragement from the hon. Member for Gateshead, West (Mr. Horam). No doubt he will appreciate, when we are pressed in Committee, the difficulties experienced by the Government in this area.

Mr. Healey: I am surprised at what the hon. and learned Gentleman said. The fact is that he made a forecast. I was not asking for another forecast from the Government. I asked what were the assumptions which led to the forecast on the exchange rate, the depletion rate and the increase in the real value of oil, if any. The Government made a forecast which was much lower than those made by most other people. All we want to know is on what assumption it was based.

Mr. Rees: The right hon. Gentleman is factually wrong. We made no such forecast. We approached the problem, dare I say it, with circumspection and humility, obviously unlike himself.
The right hon. Gentleman is cavalier with his facts. For instance, he came out with a startling proposition, which certainly is not borne out by the Red Book, that the increase in revenue this year would be £1,500 million. The increase in direct taxation will be of the order of £235 million, most of which is covered by the increase in petroleum revenue tax. Indeed, when I heard the right hon. Gentleman weep salt tears about the increase in direct taxation I thought for a moment that he had cast himself in a new role—that of the Howard Jarvis of High-

gate.In fact, as we ploughed a little deeper into his speech we realised that he wished to be recorded, like Sir William Harcourt, for his addition to capital taxation. He might also reflect that Sir William Harcourt's estate was one of the first to be caught by estate duty after its introduction. I do not want to forecast a similar fate for the heirs of the right hon. Gentlemen.
I turn with rather more pleasure to the more perceptive speech by my hon. Friend the Member for St. Marylebone. He, like my hon. Friend the Member for Croydon, South (Sir W. Clark), speculated whether the time had not come to phase out stock relief, reduce capital allowances and make way for a cut in corporation tax. My hon. Friends will know that stock relief is a very imperfect measure of relief in inflationary times. Indeed, we are addressing ourselves, with the help of the professional and accountancy bodies, to a possible reform of corporation tax, to take account of this, so that the reliefs will be more evenly and fairly spread.
My hon. Friend the Member for Croydon, South also turned his attention to the question of small companies. He drew attention to the fact that too many assets and too much financial muscle are often locked up in small companies. He will be aware that we shall be producing, I hope, in Committee a range of provisions to deal with de-mergers. I do not pretend that it will necessarily be the last word in this delicate and complicated area. However I hope that it will go some distance. With his assistance over the life of this Parliament, I hope that we shall be able to produce something comprehensive, practical and constructive in this area.
The hon. Member for Batley and Morley (Mr. Woolmer), who is a member of the Select Committee, again drew attention to what he regarded as the underestimate of the take of petroleum revenue tax. Dare I say to him and the other right hon. and hon. Gentlemen who grace that Committee that it seems we are assailed on two fronts. We are told that we have been a little over-optimistic on our growth rates but a little cautious on our petroleum revenue tax forecast. It may be, therefore, that the two cancel each other out. Perhaps we are aiming roughly at the right objectives.
The hon. Member for Colne Valley (Mr. Wainwright) gave a pale imitation of


the kind of speech that Mr. John Pardoe would have given on behalf of the Liberal Party. [HON. MEMBERS: " A re-tread."] It is not for me to describe the hon. Gentleman as a re-tread. All I am saying is that he is doing his best in rather difficult circumstances. We know that he has a rather curious raft of policies to put over. We know the addiction of the Liberal Party to a statutory prices and incomes policy. When all but he have fled from that burning ship, the hon. Gentleman will obviously go down at the salute. I do not think that he will be able to sell that proposition—I may be wrong, of course—to a future Lib-Lab pact, but we will await the formation of that delicate alliance in due course.
The hon. Gentleman also touched on the lack of incentives, as he chose to describe it, in this Finance Bill, which leads me to suppose that he has not inherited John Pardoe's research assist-cuts either. If he cares to look through the Bill, he will see that there is a range of provisions dealing with share incentive schemes, of which I hope he will strongly approve. So I hope that he will give us his support during the Committee and Report stages.
The hon. Gentleman launched out a little bit and invited us to consider the Loi Monory. I can tell him that we are indeed giving close consideration to that, but it is only one aspect of a much wider question as to how we can stimulate investment by ordinary people and involvement of our fellow countrymen on a much wider scale in the equity market. He will appreciate, as I am sure the whole House will, that this is only one small part of a much larger and very important question.
Perhaps my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) will forgive me if, since he is not here, I do not deal at length with his contribution. Obviously he did not have time to develop his theme completely. I will, however, say to him and to the hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) that it would be attractive to put our excise duties on some ad valorem basis, perhaps to make them subject to VAT. But they will appreciate that there are considerable administrative difficulties. It would mean collecting tax at a whole range of retail points, which would make it infinitely

more difficult to collect, and the transitional period would be painful indeed. However, we have noted the point and our minds are not entirely closed to that question, although it is certainly something that could not be approached in a hurry.
I am deeply apologetic that I was not present to hear the contribution of the hon. Member for West Lothian (Mr. Dalyell), as I was not during the Budget debate. I can assure him, as I am sure he will accept, that there is no personal animus and that I have the highest regard for his contributions. I have, however, taken careful note of the two points he made, and he will recall that he raised them indirectly during the last Treasury Question Time.

Mr. Dalyell: There is no objection to the hon. and learned Gentleman's avoiding me, but would he concentrate his mind on the question of tax avoidance and tell us whether he accepts the figures which I have now produced on two occasions?

Mr. Rees: In fact, the figures were produced, I think, by the Inland Revenue Staff Federation, and they were based, I think, on the evidence given by the chairman of the Board of Inland Revenue to the Expenditure Committee two years ago. Perhaps the more up-to-date and realistic figure is that which has been produced by the Central Statistical Office, which has been published—about 3·5 per cent. of gross domestic product.
As I said to the hon. Gentleman on a previous occasion, whether the figures be more or whether they be less, we are not complacent about this subject. But, to say crudely, as I think the Inland Revenue Staff Federation says, that another 1,000 or 2,000 officials added to the staff there would collect half a billion pounds in taxes grossly underestimates the problem. Indeed, I would remind the hon. Gentleman and the House that the Inland Revenue Department and the Customs and Excise numbered well over 100,000 people during the past Administration, and they were not noticeably more successful in collecting taxes.
So far, the cuts that we have imposed have been not more than 7,000 and there have been no cuts in the specific Departments concerned with avoidance and evasion. The hon. Gentleman will appre-


ciate that the problem is not at all comparable with that facing the Department of Health and Social Security, where until recently there had been a very small number of people specifically charged with avoidance. Practically every person in the two Revenue Departments is concerned with this matter, but it takes time; and of course we are always perfecting and sharpening techniques. In case Labour right hon. and hon. Gentlemen should think that we are lax in this respect, I can point to at least four provisions in this Finance Bill that are directed to the question of tax avoidance.
The speech made by the right hon. Member for Llanelli was a muted hwyl, once again marred, like the speeches of his right hon. Friends, by being totally bereft of constructive thinking or any positive policies.
I come to the more general questions that have been raised, particularly the question of the distributional effects. The whole fire of the Opposition was directed to the abolition of the lower rate band. I know that hon. and right hon. Gentlemen on the Opposition Benches have a deep emotional attachment to the lower rate band, although I recall that they were less dogmatic about its attractions in April 1978. The right hon. Member for Heywood and Royton said that it was a matter of fine balance whether on that occasion they should have gone for a lower rate band or for increasing the thresholds. We have thought it better on this occasion to raise the thresholds and to keep 1,300,000 people out of tax altogether rather than to perpetuate an expensive gimmick.

Mr. Denzil Davies: The Government are abolishing the lower rate band. It is not a question of deciding whether the thresholds are increased or whether the bands are increased; it is a question of whether the lower rate band should be abolished.

Mr. Rees: The right hon. Gentleman will appreciate that this gave us the additional room for manoeuvre which enabled us totally to revalorise the thresholds by 18 per cent. If the right hon. Gentleman and his hon. Friends feel that the lower rate band still has charms, let them disregard my views and those of my right hon. and hon. Friends and take account of the views given by Mr. John Kay to

the Select Committee on the Treasury and Civil Service, as follows
 We have found little substance in any of the arguments in favour of the reduced rate band. It does not help the low paid. It does not significantly increase incentives either for those in work or as between those in work and those out of work. Few of those who were in the reduced rate band were in the poverty trap and few of those who were in the poverty trap were in the reduced rate band.
Against that compelling evidence we were bound to consider the abolition of the lower rate band. I hope that, on reflection, right hon. Gentlemen opposite, recognising that it was forced on them by a curious combination of the TUC and the Liberal Party, will feel able to jettison this commitment which they assumed rather improvidently in Government.
I turn to the question of capital taxation which was raised by my hon. Friends the Members for Buckingham (Mr. Ben-yon), and Croydon, South. In all candour, I share their disappointment that it has not been possible for us to make greater progress in this area in this year. I remember vividly the debates we had on the introduction of capital transfer tax and the second Finance Bill of 1975. The right hon. Member for Heywood and Royton, too, will probably remember our keen encounters on that ill-thought-out fiscal measure, although it may be the tombstone of the right hon. Member for Leeds, East, if he wants to be commemorated for any particular contribution he made during his period at 11 Downing Street.
I have no doubt of the damage which the capital tax structure which we inherited does to the economic structure of the country because of its weight and complexity, the number of taxes and the higgledy-piggledy way in which they interact. All these taxes are out of proportion to their yield.
This year, with the containment of inflation as our primary objective, to have undertaken the far-reaching reforms which we have in mind and are necessary, would have unbalanced our fiscal measures.
The right hon. Member for Llanelli has not applied himself to the Finance Bill. What we have done this year is not negligible, as some of my hon. Friends have reminded the House. We shall have time to explore our proposals in detail in Committee.
There is a great deal to be done, particularly in considering the impact of capital transfer tax on agriculture, in the light of the conclusions of the Northfield committee. We are conscious of the decline in the acreage available for tenant farmers, which must be particularly discouraging to young men without capital who wish to take up farming. Much remains to be done, and much will be done over the lifetime of this Parliament. I am happy to give that assurance.
I commend to the House the provisions designed to help charities and charitable giving. It is a little surprising that the Opposition, who seem to believe that they have a monopoly of compassion, made no mention of the provisions for charities. They are designed to make it easier for people to make donations to charity. They are designed to shorten the period that charitable covenants need to run. They were requested by the Council for Voluntary Services. They are designed to give full tax relief on payments under £3,000 made under deeds of covenant.
The provisions reverse a measure introduced by Dr. Dalton, but that was an ill-conceived, mean measure introduced many years ago. We shall put it right. We believe that there will always be areas in our cultural and social life which cannot be covered by the State and which can be more effectively covered by charities and private generosity. I know that Opposition Members have an obsession about public schools, but if they benefit at all it will be only slightly.
I turn to the question of enterprise zones, which was treated in a singularly sour and unsympathetic way by the right hon. Member for Llanelli. It was appraised more truly by my hon. Friend the Member for Oxford (Mr. Patten). Since the right hon. Gentleman seems to be so keen to discover what measures we propose to invigorate business and provide employment, I shall describe our intention. Our proposals are based on the radical proposition of less Government intervention, not more. That might be the way to stimulate development in economic blackspots.
If the Opposition say that there is no demand for such measures, I have news for them. At least seven local authorities which are controlled by the Labour Party

are showing an interest in them. They are Stoke-on-Trent, Islington, Hull, Don-caster, Corby, Hartlepool and Middlesbrough. If Opposition Members are lukewarm about the proposals, they should check in their constituencies to see whether they are speaking in the same tone as the people that they affect to represent.
The hon. Member for Workington (Mr. Campbell-Savours) said that the measures might draw economic activity from the surrounding areas. That is an inevitable consequence of any regional policy. We believe that by concentrating help, by removing restrictions in narrow areas of urban dereliction, there is a possibility of a rebirth and revitalisation of industrial and commercial activity. We see no reason to distinguish between the two activities. The measures will provide the jobs that are needed so badly.
Even after listening closely to their speeches, I cannot conceive why Opposition Members want to divide the House on the Bill. We had a debate last night on the public expenditure White Paper. I understand why they wanted to divide on that. I understand why they should want to stand out as representing the party which favours public expenditure and why they should want to put as much distance as possible between themselves and the public expenditure cuts which they were compelled by the IMF to introduce in 1976 and 1977. Why must they vote against the Bill? Is it purely because of the lower rate? We all know why that was introduced by the Labour Administration. Are they still deferring to the Liberal Party and the TUC on that?
Surely one of the advantages of being in opposition is that the Opposition can shake free of ill-judged commitments. Are they voting against relief for charitable giving? Are they voting against relief for small businesses, against enterprise zones, the widows' bereavement allowance or against increased thresholds? Are they voting because they want to reverse the shift from direct to indirect taxation? Are they voting because they would like to see the basic rate of income tax increased?
We have been left in doubt about the criticisms that the Opposition level against the Bill. We are left in doubt about then-alternatives. The Opposition have given


us a muddle of prejudice to conceal their want of coherent, constructive policies.
The House will have noticed tonight, and the world will notice tomorrow, that by any standards we can commend the Bill to the House as offering a blend of realism and imagination which is consistent with what we have done, and what

Division No. 288]
AYES
[10 pm


Adley, Robert
Eden, Rt Hon Sir John
Langford-Holt, Sir John


Aitken, Jonathan
Edwards, Rt Hon N. (Pembroke)
Latham, Michael


Alexander, Richard
Eggar, Timothy
Lawrence, Ivan


Alison, Michael
Emery, Peter
Lawson, Nigel


Amery, Rt Hon Julian
Eyre, Reginald
Lee, John


Arnold, Tom
Faith, Mrs Sheila
Lennox-Boyd, Hon Mark


Aspinwall. Jack
Farr, John
Lester, Jim (Beeston)


Atkins, Rt Hon H. (Spelthorne)
Fell, Anthony
Lewis, Kenneth (Rutland)


Atkins, Robert (Preston North)
Fenner, Mrs Peggy
Lloyd, Ian (Havant & Waterloo)


Atkinson, David (B'mouth, East)
Finsberg, Geoffrey
Lloyd, Peter (Fareham)


Baker, Kenneth (St. Marylebone)
Fisher, Sir Nigel
Loveridge, John


Baker, Nicholas (North Dorset)
Fletcher, Alexander (Edinburgh N)
Luce, Richard


Banks, Robert
Fletcher-Cooke, Charles
Lyell, Nicholas


Beaumont-Dark, Anthony
Fookes, Miss Janet
McCrindle, Robert


Bell, Sir Ronald
Forman, Nigel
Macfarlane, Neil


Bendall, Vivian
Fowler, Rt Hon Norman
MacGregor, John


Benyon, Thomas (Abingdon)
Fox, Marcus
Macmillan, Rt Hon M. (Farnham)


Benyon, W. (Buckingham)
Fraser, Rt Hon H. (Stafford & St)
McNair-Wilson, Michael (Newbury)


Best, Keith
Gardiner, George (Reigate)
McNair-Wilson, Patrick (New Forest)


Bevan, David Gilroy
Gardner, Edward (South Fylde)
Madel, David


Bitten, Rt Hon John
Garel-Jones, Tristan
Major, John


Biggs-Davison, John
Glyn, Dr Alan
Marland, Paul


Blackburn, John
Goodhart, Philip
Marlow, Tony


Body, Richard
Goodhew, Victor
Marshall, Michael (Arundel)


Bonsor, Sir Nicholas
Goodlad, Alastair
Marten, Neil (Banbury)


Boscawen, Hon Robert
Gow, Ian
Mates, Michael


Bottomley, Peter (Woolwich West)
Gower, Sir Raymond
Mather, Carol


Bowden, Andrew
Grant, Anthony (Harrow C)
Maude, Rt Hon Angus


Braine, Sir Bernard
Greenway, Harry
Mawby, Ray


Bright, Graham
Grieve, Percy
Mawhinney, Dr Brian


Brinton, Tim
Griffiths, Eldon (Bury St Edmunds)
Maxwell-Hyslop, Robin


Brittan, Leon
Griffiths, Peter (Portsmouth N)
Mayhew, Patrick


Brooke, Hon Peter
Grist, Ian
Mellor, David


Brotherton, Michael
Grylls, Michael
Meyer, Sir Anthony


Brown, Michael (Brigg & Sc'thorpe)
Gummer, John Selwyn
Miller, Hal (Bromsgrove & Redditch)


Browne, John (Winchester)
Hamilton, Hon Archie (Eps'm&Ew'll)
Mills, lain (Meriden)


Bruce-Gardyne, John
Hamilton, Michael (Salisbury)
Mills, Peter (West Devon)


Bryan, Sir Paul
Hampson, Dr Keith
Miscampbell, Norman


Buck, Antony
Hannam, John
Mitchell, David (Basingstoke)


Budgen, Nick
Haselhurst, Alan
Moate, Roger


Bulmer, Esmond
Havers, Rt Hon Sir Michael
Montgomery, Fergus


Burden, F. A.
Hawkins, Paul
Moore, John


Butcher, John
Hawksley, Warren
Morgan, Geraint


Butler, Hon Adam
Hayhoe, Barney
Morris, Michael (Northampton, Sth)


Cadbury, Jocelyn
Heddle, John
Morrison, Hon Charles (Devizes)


Carlisle, John (Luton West)
Heseltine, Rt Hon Michael
Morrison, Hon Peter (City ol Chester)


Carlisle, Kenneth (Lincoln)
Hicks, Robert
Mudd, David


Carlisle, Rt Hon Mark (Runcorn)
Higgins, Rt Hon Terence L.
Murphy, Christopher


Chalker, Mrs. Lynda
Hill, James
Needham, Richard


Channon, Paul
Hogg, Hon Douglas (Grantham)
Nelson, Anthony


Chapman, Sydney
Holland, Philip (Carlton)
Neubert, Michael


Churchill, W. S.
Hooson, Tom
Newton, Tony


Clark, Hon Alan (Plymouth, Sutton)
Hordern, Peter
Normanton, Tom


Clark, Sir William (Croydon South)
Howell, Rt Hon David (Guildford)
Onslow, Cranley


Clarke, Kenneth (Rushcliffe)
Howell, Ralph (North Norfolk)
Oppenheim, Rt Hon Mrs Sally


Cockeram, Eric
Hunt, David (Wirral)
Osborn, John


Colvin, Michael
Hunt, John (Ravensbourne)
Page, John (Harrow, West)


Cope, John
Hurd, Hon Douglas
Page, Rt Hon Sir R. Graham


Cormack, Patrick
Irving, Charles (Cheltenham)
Page, Richard (SW Hertfordshire)


Costain, A. P.
Jenkin, Rt Hon Patrick
Parkinson, Cecil


Cranborne, Viscount
Jessel, Toby
Parris, Matthew


Critchley, Julian
Johnson Smith, Geoffrey
Patten, Christopher (Bath)


Crouch, David
Jopling, Rt Hon Michael
Patten, John (Oxford)


Dean, Paul (North Somerset)
Kaberry, Sir Donald
Pattie, Geoffrey


Dickens, Geoffrey
Kellett-Bowman, Mrs Elaine
Pawsey, James


Dorrell, Stephen
Kimball, Marcus
Percival, Sir Ian


Dover, Denshore
King, Rt Hon Tom
Pink, R. Bonner


du Cann, Rt Hon Edward
Kitson, Sir Timothy
Porter, George


Dunn, Robert (Dartford)
Knight, Mrs Jill
Prentice, Rt Hon Reg


Durant, Tony
Knox, David
Price, David (Eastleigh)


Dykes, Hugh
Lamont, Norman
Prior, Rt Hon James

we have promised to do. I hope that on that basis the House will support it.

Question put, That the Bill be now read a Second time:

The House divided: Ayes 287, Noes 227.

Proctor, K. Harvey
Speed, Keith
Vaughan, Dr Gerard


Pym, Rt Hon Francis
Speller, Tony
Viggers, Peter


Raison, Timothy
Spicer, Jim (West Dorset)
Waddington, David


Rathbone, Tim
Spicer, Michael (S Worcestershire)
Wakeham, John


Rees, Peter (Dover and Deal)
Squire, Robin
Waldegrave, Hon William


Rees-Davies, W. R.
Stainton, Keith
Walker, Rt Hon Peter (Worcester)


Renton, Tim
Stanbrook, Ivor
Walker-Smith, Rt Hon Sir Derek


Rhodes James, Robert
Stanley, John
Wall, Patrick


Rhys Williams, Sir Brandon
Steen, Anthony
Waller, Gary


Ridsdale, Julian
Stevens, Martin
Ward, John


Roberts, Michael (Cardiff NW)
Stewart, Ian (Hitchin)
Warren, Kenneth


Roberts, Wyn (Conway)
Stokes, John
Watson, John


Rost, Peter
Stradling Thomas, J.
Wells, John (Maidstone)


Sainsbury, Hon Timothy
Tapsell, Peter
Wells, Bowen (Hert'rd & Stev'nage)


St. John-Stevas, Rt Hon Norman
Taylor, Robert (Croydon NW)
Wheeler, John


Scott, Nicholas
Taylor, Teddy (Southend East)
Whitelaw, Rt Hon William


Shaw, Giles (Pudsey)
Tebbit, Norman
Whitney, Raymond


Shaw, Michael (Scarborough)
Temple-Morris, Peter
Wilkinson, John


Shelton, William (Streatham)
Thomas, Rt Hon Peter (Hendon S)
Williams, Delwyn (Montgomery)


Shepherd, Colin (Hereford)
Thompson, Donald
Winterton, Nicholas


Shepherd, Richard (Aldridge-Br'hills)
Thorne, Neil (llford South)
Wolfson, Mark


Shersby, Michael
Thornton, Malcolm
Young, Sir George (Acton)


Silvester, Fred
Townsend, Cyril D. (Bexleyheath)



Sims, Roger
Trippler, David
TELLERS FOR THE AYES:


Skeet, T. H. H.
Trotter, Neville
Mr. Spencer Le Marchant and


Smith, Dudley (War. and Leam'ton)
van Straubenzee, W. R.
Mr. Anthony Berry


NOES


Abse, Leo
Dunwoody, Mrs Gwyneth
Kinnock, Neil


Adams, Allen
Eadie, Alex
Lambie, David


Allaun, Frank
Eastham, Ken
Lamborn, Harry


Alton, David
Ellis, Raymond (NE Derbyshire)
Leadbitter, Ted


Anderson, Donald
Ellis, Tom (Wrexham)
Leighton, Ronald


Archer, Rt Hon Peter
English, Michael
Lestor, Miss Joan (Eton & Slough)


Ashley, Rt Hon Jack
Ennals, Rt Hon David
Lewis, Arthur (Newham North West)


Ashton, Joe
Evans, loan (Aberdare)
Lewis, Ron (Carlisle)


Atkinson, Norman (H'gey, Tott'ham)
Ewing, Harry
Litherland, Robert


Bagier, Gordon A. T.
Faulds, Andrew
Lofthouse, Geoffrey


Barnett, Guy (Greenwich)
Field, Frank
Lyon, Alexander (York)


Barnett, Rt Hon Joel (Heywood)
Fitch, Alan
Lyons, Edward (Bradford West)


Belth, A. J.
Fitt, Gerard
McDonald, Dr Oonagh


Benn, Rt Hon Anthony Wedgwood
Flannery, Martin
McElhone, Frank


Bennett, Andrew (Stockport N)
Fletcher, L. R. (Ilkeston)
McGuire, Michael (Ince)


Bidwell, Sydney
Fletcher, Ted (Darlington)
MacKenzie, Rt Hon Gregor


Booth, Rt Hon Albert
Foot, Rt Hon Michael
Maclennan, Robert


Bottomley, Rt Hon Arthur (M'brough)
Ford, Ben
McNally, Thomas


Bradley, Tom
Forrester, John
McWilliam, John


Brown, Robert C. (Newcastle W)
Foster, Derek
Magee, Bryan


Brown, Ronald W. (Hackney S)
Fraser, John (Lambeth, Norwood)
Marks, Kenneth


Brown, Ron (Edinburgh, Leith)
Freeson, Rt Hon Reginald
Marshall, Dr Edmund (Goole)


Buchan, Norman
Freud, Clement
Marshall, Jim (Leicester South)


Callaghan, Jim (Middleton & P)
Garrett, John (Norwich S)
Mason, Rt Hon Roy


Campbell-Savours, Dale
Garrett, W. E. (Wallsend)
Meacher, Michael


Canavan, Dennis
George, Bruce
Mellish, Rt Hon Robert


Cant, R. B.
Gilbert, Rt Hon Dr John
Mikardo, Ian


Carter-Jones, Lewis
Ginsburg, David
Miller, Dr M. S. (East Kilbride)


Cartwright, John
Grant, George (Morpeth)
Mitchell, Austin (Grimsby)


Clark, Dr David (South Shields)
Grant, John (Islington C)
Mitchell, R. C. (Soton, Itchen)


Cocks, Rt Hon Michael (Bristol S)
Grimond, Rt Hon J.
Morris, Rt Hon Alfred (Wythenshawe)


Coleman, Donald
Hamilton, W. W. (Central Fife)
Morris, Rt Hon Charles (Openshaw)


Concannon, Rt Hon J. D.
Hardy, Peter
Morris, Rt Hon John (Aberavon)


Conlan, Bernard
Harrison, Rt Hon Walter
Morton, George


Cook, Robin F.
Hart, Rt Hon Dame Judith
Moyle, Rt Hon Roland


Cowans. Harry
Hattersley, Rt Hon Roy
Newens, Stanley


Crowther, J. S.
Haynes, Frank
Oakes, Rt Hon Gordon


Cryer, Bob
Healey, Rt Hon Denis
Ogden, Eric


Cunliffe, Lawrence
Heffer, Eric S.
O'Halloran, Michael


Cunningham, George (Islington S)
Home Robertson, John
O'Neill, Martin


Cunningham, Dr John (Whitehaven)
Homewood, William
Orme, Rt Hon Stanley


Dalyell, Tarn
Horam, John
Owen, Rt Hon Dr David


Davidson, Arthur
Howells, Geraint
Palmer, Arthur


Davles, Rt Hon Denzil (Llanelli)
Huckfield, Les
Park, George


Davies, Ifor (Gower)
Hudson, Davies, Gwilym Ednyfed
Parker, John


Davis, Clinton (Hackney Central)
Hughes, Roy (Newport)
Parry, Robert


Davis, Terry (B'rm'ham, Stechford)
Janner, Hon Greville
Pavitt, Laurie


Dean, Joseph (Leeds West)
Jay, Rt Hon Douglas
Pendry, Tom


Dixon, Donald
John, Brynmor
Prescott, John


Dobson, Frank
Johnson, James (Hull West)
Price, Christopher (Lewisham West)


Dormand, Jack
Jones, Rt Hon Alec (Rhondda)
Race, Reg


Douglas-Mann, Bruce
Jones, Barry (East Flint)
Radice, Giles


Dubs, Alfred
Kaufman, Rt Hon Gerald
Rees, Rt Hon Merlyn (Leeds South)


Duffy, A. E. P.
Kerr, Russell
Richardson, Jo


Dunn, James A. (Liverpool, Kirkdale)
Kilfedder, James A.
Roberts, Albert (Normanton)


Dunnett, Jack
Kilroy-Silk, Robert
Roberts, Allan (Bootle)

Question accordingly agreed to.

BUSINESS OF THE HOUSE

Ordered,

That, at this day's sitting, the Motion relating to the Local Government, Planning and Land (No. 2) Bill may be proceeded with, though opposed, until any hour.—[Mr. Boscawen].

FINANCE (No. 2) BILL

Ordered,

That Clauses 10, 17, 18, 20, 23, 53, 68 and 91 be committed to a Committee of the whole House

That the remainder of the Bill be committed to a Standing Committee:

That, when the provisions of the Bill considered respectively by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Boscawen.]

LOCAL GOVERNMENT, PLANNING AND LAND (NO. 2) BILL

The Minister for Local Government and Environmental Services (Mr. Tom King): I beg to move,
That it be an Instruction to Standing Committee D, That they have power to divide the Local Government, Planning and Land (No. 2) Bill into two Bills, the first consisting of clause 106 and a title and a citation and extent clause relating thereto, and the second consisting of the remainder of the Bill; that any proceedings on the second Bill may stand postponed until after the consideration of the first Bill; and that either Bill may be reported to the House as soon as it has been considered.
This is a technical motion. Because it is an unusual motion, I feel that I should explain it to the House. Though I recognise that the terms of order are somewhat narrow on this motion, it is right that I explain the background to the proposal. If I do that briefly, I hope, should right hon. and hon. Members raise points, that with the leave of the House I shall have the opportunity to reply to the debate.
This matter was discussed in Standing Committee D and the members of that Committee are familiar with the background. The proposal concerns the need to ensure that clause 106, which increases the borrowing limits of the new towns, is enacted before the date on which the present borrowing limit is exceeded.
New towns are subject to statutory limits on the amount of borrowing that may be outstanding at any time, though that limit has periodically been increased. It was increased most recently by the New Towns Act 1977 and a subsequent order of 1979. The present limit for all new towns is £3,250 million and I expect that limit to be reached on 14 September, when interest payments of £150 million to the National Loans Fund become due.

Clause 106 of the Bill provides for the limit to be raised to £3,625 million and subsequently to any sum up to £4,000 million that the Secretary of State may by order specify. That is a conventional increase in borrowing limit arrangements with which the House will be familiar. It is not, if I may correct misleading impressions published in the press, something that has taken the Government by surprise.

The hon. Member for Greenwich (Mr. Barnett) was candid enough to say that this matter had been recognised by Ministers in the last Labour Government as long ago as February 1979. It was absolutely predictable that when the interest payments fell due to the National Loans Fund the limit would be exceeded.

The Government included the clause in the original Bill which was introduced into their Lordships' House, but at the request of the Opposition the Government were pleased to agree that the Bill should be introduced into this House first. However, that meant that the Bill was not likely to become an Act before the date on which the borrowing limit would be exceeded.

It was, therefore, necessary to consider what other possibility there might be of ensuring that the new towns borrowing limits and powers were not adversely affected. I am sure that, whatever right hon. and hon. Members may say about the procedure, there is no desire in any part of the House that the new towns should be in default in their payments or be otherwise disadvantaged. Right hon. and hon. Members will recognise that this proposal ensures that the new towns are not disadvantaged and that the borrowing limit is increased within the time necessary to ensure that there is no risk of default.

It might be helpful if I outline the full procedure. I should like to make clear that there are two possibilities under previous precedents of the House. This could either be an instruction that empowers the Committee or it could be an instruction that directs the Committee. The House will note that the motion before it is that this be an instruction to Standing Committee D that it has power. It is now necessary, if the instruction is approved by the House tonight, that it goes to Standing Committeee D, which will decide whether it wishes to exercise that power. It might be helpful to the House and to members of the Standing Committee who are present if I confirm the procedure that it would then be our intention to follow.

It would be necessary to move two textual amendments to the clause to enable it to stand apart from the rest of the Bill. These would merely change the name in the clause from " the 1965 Act " to " the New Towns Act 1965 ", and in


line 14 of clause 106, after " Commission ", insert " for the New Towns ". Then it would be necessary for a new clause to be moved setting out the citation and extent of the new Bill and, finally, the long title of the new Bill. All these motions, with the agreement of the House, if this instruction is approved, will be tabled tomorrow.

I also thought that it might be helpful to the Committee in considering this matter to know that if the instruction is approved tonight I propose to make copies of the draft Bill for the new towns—which is what it would then be—available to the Committee at the Committee's resumed consideration on Tuesday, so that hon. Members, if they approve the motion that I would then move in Standing Committee on Tuesday, will see the shape that the Bill would then have.

Mr. Stanley Newens: If the clause is treated as a separate Bill, it will not have had a Second Reading. Therefore, hon. Members will not have had an opportunity of discussing the new Bill, as the clause will become, in the way that they would normally do. What steps does the Minister propose to take to make available at a later stage the opportunity for hon. Members to give the attention that they would wish to give to all the issues that are raised? This is very important to those of us who have a long-standing interest in the new towns movement.

Mr. King: The whole Bill has had a Second Reading, inclusive of clause 106. What this procedure will mean is that clause 106 in its new form will now have a completely separate Report stage. Therefore, there will be an exceptional opportunity—in relation, as it were, to other clauses of the Bill—for this matter to be fully discussed. If the instruction is approved and then if the motion is approved in Committee and we consider the clause separately, at the end of that, instead of the more conventional motion that one would have, " That the clause stand part of the Bill ", the motion will be that the clause be separately reported to the House. That is not the exact wording, but that is the effect of it. There will therefore be a separate Report stage for that one clause. I think that that will more than meet the point that

the hon. Gentleman fairly raises and will provide him with an opportunity to debate the matter on the Floor of the House.
I recognise that this is an unusual procedure, but it is a necessary procedure on this occasion if we are to meet the needs of the new towns and ensure that there is no risk of their borrowing powers being exceeded and no risk to their financial situation in that respect.
With that brief introduction explaining the background, I hope that hon. Members will feel able to support the instruction. As I have said, if there are further points that arise during discussion of the instruction, with the leave of the House I shall seek to reply to them.

Mr. Guy Barnett: The Minister has introduced, if that is the correct word, this instruction in a very reasonable fashion, as is his normal wont, but there is a number of questions which it is not unreasonable to ask in the light of the instruction that the Minister has felt bound to move and one or two comments that ought to be made.
The right hon. Gentleman generously suggested that the Opposition would not wish to divide the House on the instruction as we would not wish to endanger the possibility of the new towns finding themselves without any money. It may be within his recollection that in 1977 the then Labour Government introduced the New Towns Bill and provided the opportunity for debate on Second and Third Readings. The then Conservative Opposition divided the House on both Second and Third Readings. I do not know what my hon. Friends will wish to do. Nevertheless, the debate provides us with some opportunity to discuss the position in which the Government find themselves.
It struck me that my hon. Friend the Member for Harlow (Mr. Newens) made a reasonable point, and it is one to which we shall wish to return. It was my feeling—I expressed it on Second Reading of the Local Government, Planning and Land (No. 2) Bill—that the original Bill should have had more than one day on Second Reading. If one were to cull the pages of Hansard, I doubt whether one mention would be found of clause 106 on Second Reading. There was not time to mention it; there were so many issues


to discuss. We now discover that on that occasion we were discussing no fewer than five Bills.
Would it not have been a fairer procedure for the Government to have introduced a new towns money Bill quite separately so as to provide the House with Second and Third Readings, as in 1977? There would have been plenty of time, because we understand from the Minister that the new towns do not need the extra borrowing limit until 14 September.
The Minister has said that when I presented the statutory instrument to raise the borrowing limit in February 1979 I said that it was likely that the new towns would need more money in the late summer of 1980. There was, therefore, likely to be a need for primary legislation to provide the new towns with the money that they needed in September.
I am not sure that I find the Minister's explanation convincing. It seems surprising that the Government thought that they could get away with introducing the Local Government, Planning and Land (No. 2) Bill in another place. I cannot understand how they possibly thought that Parliament would accept the introduction in another place of a Bill containing so many contentious clauses. Surely it was no great surprise to the Government when the measure had to be introduced in this place.
It was not the same Bill that was introduced in this place. The Minister's Department had to go through the Bill carefully. It had to examine each clause to ascertain which clauses could be cut out and what changes needed to be made. I know the efficiency of officials in the Department of the Environment and I cannot believe that they could possibly have made such an oversight.
The Bill did not receive its Second Reading until early this year. That being so, there was not the slightest chance of a Bill of such length passing through both Houses before the spill-over Session. It was before Christmas last year that the Government accepted that for which the Opposition were pressing. There was an awareness of the situation before Christmas on the part of the Department and the Government. Surely it was possible for the Government to introduce a new

towns money Bill or to state their intention of doing so.
It is curious, too, that we wait until May before we are told that the instruction has to be given to the Committee shortly before it comes to the consideration of clause 106. It may be that I have a suspicious mind, but I question whether the explanation that the Minister has given contains all the reasons that lie behind this sudden change of plan.
It has been my understanding that the Government were attempting to raise sufficient money for new towns expenditure by the sale of assets. Indeed, for some long period that has been the obsession, if I may put it that way, of the Conservative Party. I have reason to believe that for many months past Conservative Members have been under an illusion that there was a great deal more money to be made by the sale of assets than there is.
I took the liberty of writing to the Under-Secretary of State for Defence for the Royal Navy, who I believe I see in his place, advising him that I proposed to refer to the speech that he made on the Second Reading of the New Towns Bill on 15 June 1977, which is my first reason for believing that. After my right hon. Friend the then Secretary of State for the Environment introduced the Bill, the hon. Gentleman said:
 if the Bill were not to be passed—and this is always possible; there could be a General Election or something else which stopped it—the present limit would be reached in two or three months, so what would be the situation then? Presumably, there is some contingency provision.
I made it clear to the hon. Gentleman and the Opposition that, as far as I knew, there was no contingency provision and that the consequence of the Bill not being passed was that within a matter of weeks the new towns would find themselves without money for their development programmes. Nevertheless, the Opposition persisted on Second and Third Reading and divided the House. Indeed, later in the same speech the hon. Gentleman said:
 I believe that the assets now have a very high value, and it would probably have made a great deal of sense if some of them were sold off. That would go a long way towards funding the £1,000 million which we are discussing."—[Official Report, 15 June 1977; Vol. 933, c. 409–10.]
I do not know how far " a long way " is—£200 million, £300 million? I do not


know what the hon. Gentleman had in mind. He did not make himself precisely clear.
It is, however, clear that the Secretary of State for the Environment has been keen to encourage or impress on new town development corporations, as indeed he has on the Commission for the New Towns, the necessity to sell off assets, although I believe that he has not been quite as successful as he hoped. The right hon. Gentleman and Ministers in his Department have not, so far as I can discover, given a clear account of how the sale of assets has gone. I had to get that information, as did other hon. Members, from the planning correspondent of The Guardian. It may be proved wrong, and I hope that the Minister can perhaps give us more accurate information than that reported by David Hencke on 2 April, when he said:
 Under half the Government's £120 million property sales target set for new towns has met the April 1 deadline... Government figures show that the end of January only £8 million worth of property—such as shopping centres, offices and factories—had been sold with another £58 million worth of sales at an advanced stage.
More up-to-date figures from estate agents now show that only £59 million of property—mainly from Bracknell, Welwyn Garden City, Harlow, Hatfield, Basildon, Hemel Hempstead and Redditch—has been sold or is about to be sold.
It appears from that investigation that the sale of assets has fallen far short of the Secretary of State's expectations. Indeed, that was the advice that I gave him in a speech I made on Third Reading of the New Towns Bill in 1977.
Why did that happen? I do not think it would be right to go into detail on the issue, except to suggest that perhaps one of the reasons is that the Secretary of State did not take the legal advice that he might have taken. The corporations of Stevenage and Harlow sensibly took legal advice and discovered that it was not in accordance with the law to sell off assets in order to reduce the public sector borrowing requirement—which, as I understand, was the instruction given to them by the Secretary of State. Therefore, the consequence has been—

Mr. Bowen Wells: Is it not a fact that in the case of Stevenage the legal advice was

taken by the purchasers of property from the development corporation? The development corporation did not take legal advice in order to stop the sales. A purchaser of those assets took the legal advice. But the advice that was tendered was tenuous and conservative.

Mr. Barnett: I do not think that the argument is much altered by the question of who took the legal advice. The legal advice cast a considerable measure of doubt upon the legality of the operation which had been recommended to the corporations by the Secretary of State.

Mr. Newens: Is it not true that in the first instance the local council in Stevenage took legal advice on this matter? It was only as a result of that advice that one of the would-be purchasers also took legal advice. In any event, had it not been for the initiative of members of the local council and the purchasers the illegal state of affairs which had been created would not have been brought to light.

Mr. Barnett: I am grateful to my hon. Friend for the additional advice he has given, but I do not wish to pursue this matter too far. I simply suggest that it appears likely that the Secretary of State might have misled development corporations to some degree in the policy he suggested to them.
I think it is important to mention a statement which emanated from the Department of the Environment. It was stated that part of the objective—apart from the stated Government objective of reducing the public sector borrowing requirement—was to finance new development of assets and, therefore, to save funds that might have been necessary by raising the borrowing limit.
Angela Singer, of The Guardian, who had made inquiries of the Department of the Environment, wrote in that newspaper on 26 March:
 An Environment Department spokesman said last night ' The Department had required certain towns to finance their investment expenditure in this financial year by sale of some of their assets This the new towns have all accepted. In addition the Secretary of State asked the new towns to undertake some further sales to reduce public sector borrowing requirement and to reduce the role of the public sector in the new towns. These of course are requests '.


There are dual purposes behind the Secretary of State's policy. I suspect—I merely suspect, and I should like, and the House deserves, more information from the Minister—that part of the reason for the mistake was that the Secretary of State and his Ministers expected the sale of new town assets to proceed at a faster rate and, therefore, thought that it was unnecessary for this legislation to be passed by both Houses of Parliament until the spill-over Session.
For this reason, it seems to me, we are now debating the instruction. The proper course that the Government ought to have taken was to have removed clause 106 from the Bill and to have introduced a separate new towns money Bill to en-able a proper debate to take place as occurred in 1977.

Mr.Stanley Newens: I have no wish to oppose the provision to ensure that new towns are provided with the funds necessary for their development. The fact that it is necessary to resort to this most unusual procedure demonstrates the confusion that arises from the manner in which new towns are administered by the Government at national level. The fact that the clause has to be hived off from the Local Government, Planning and Land (No. 2) Bill and given the status of a new Bill at least shows that the Government have miscalculated.
As my hon. Friend the Member for Greenwich (Mr. Barnett) has pointed out, this is not the first occasion when miscalculation has taken place. The Secretary of State miscalculated when he gave instructions, as they were then understood to be, to chairmen of new towns development corporations to sell off assets to the tune of £120 million. The discovery of that miscalculation at a later stage was a result of action taken in the first place by the council in Stevenage and by would-be purchasers of some of the assets to be sold off.
I would argue that the present Government have made a number of other miscalculations. They hoped that it would be possible to sell off a considerable number of assets rapidly. They made considerable play of the fact that they hoped that the sale would enable small business men to gain ownership of their own properties. Many small

business men have found, however, that the properties they rent are being sold off in blocks that they have no possibility of buying.
In raising this matter on the Floor of the House with the Secretary of State and through letters to his hon. Friends. I have been told that small business men should form themselves into consortia for the purpose of purchasing the blocks of properties in which they hold individual tenancies. The fact that small business men should be thought able to do this seems to be a total miscalculation and misunderstanding of the sort of problems faced by them. I have no reservation in saying that I believe that the Government are denying opportunities to small business men in new towns. Many small business men are concerned that at a later stage they may find that they have a landlord who is much less concerned about their interests than is their present landlord.
If there are to be a series of miscalculations by the Government, as demonstrated by the existing Bill, considerable confusion and dismay will be sown in the new towns and among those concerned about the new towns movement. I should like to have had a chance to discuss some of these issues in the House. It seems, however, that hon Members will not be able to give the attention to many of these issues that would have been possible had a separate Bill been given its own Second Reading.
My hon. Friend the Member for Greenwich has pointed out that the existing Bill comprises enough material for five Bills. Those of us who are concerned with the problems of new towns had little opportunity of being called on Second Reading to raise many of these important issues. The Minister said that it would be impossible to discuss those issues on Report. If amendments are permitted, it may be possible to raise specific matters, but a general debate will not be possible until we reach Third Reading. That is not satisfactory.
Having made a miscalculation, the Government should have introduced a new Bill. We are in considerable danger of creating a situation in the new towns in which people will not know what is happening. The opportunities that have been made available to hon. Members to raise


such matters in the past are not being provided now, and, although I do not intend to oppose the motion, it is right that I should express my considerable dissatisfaction with the procedure that we are asked to adopt.

Mr. Roy Hattersley: I shall not divide the House on the motion. As I said in Committee, denying funds to new towns is the Government's policy and not the Opposition's policy. We do not wish to pursue that line.
However, the causes of this remarkable debate should be probed a little deeper, and I look forward to the Minister fulfilling his offer to speak again if the House gives him permission to do so. The right hon. Gentleman addressed the House, as he addresses the Standing Committee, politely but disingenuously. It would stretch our credulity to accept his explanation of how the motion has come about.
The main reason adduced for this peculiar procedure is that the Opposition proposed that the local government Bill should be introduced in this House rather than in another place. But in the weeks following the abortive attempt to introduce the Bill in that inappropriate place 37 clauses were dropped. The Minister has not yet explained why clause 106 was not also dropped at that time. It is not as if the same Bill was introduced the next day without any rethinking. Weeks were taken in improving the Bill and producing it in a suitable form for the House. The Minister has not explained why this sudden emergency was not detected then and rectified in the obvious way. Nor has the right hon. Gentleman met the point, which he treated with scorn when it was put to him on Second Reading, that the local government Bill is not one Bill but a number of Bills. It is a matter of dispute between me and my hon. Friend whether it is five, six, eight or ten Bills.
The position gets more bizarre as the weeks go by. This week we have dropped one of the Bills encompassed within the local government Bill. Next week we shall add the enterprise zones, which on any normal consideration should comprise a Bill on their own. The idea that we have this extraordinary instrument with areas being removed one week and completed and added to the next is an indication

of the extreme incompetence with which the Bill has been prepared and managed. This is the only Bill in my experience that should have been introduced with errors and omissions excepted. I refer to the manner in which the passage of the Bill has been chronicled in the newspapers—not only The Guardian, for which I know that the Minister has an obsession, but the Financial Times and even The Daily Telegraph. They have referred week after week to the extra-mistakes made in preparation and pursuit of the Bill. We are seeing another example of that this evening.
I want to make two points about the substance of the new towns argument. My hon. Friends are quite right to say that one of the suspicions aroused this evening is that the Government's intentions to sell off the assets in the quantity and with the speed that they originally intended have been frustrated. That ha3 happened because the unintentional error by the Secretary of State—the suggestion that he could enforce sales—has been corrected. The new towns have exercised their proper rights to protect their interests within the terms of the present legislation.
If the Secretary of State has read, as I am sure he has, the proceedings in Standing Committee D, he will know that we debated for three sittings the legal obligations on the new towns. I mean obligations, because their rights to sell are limited. Their rights to sell—as the Under-Secretary pointed out, correcting me categorically and rightly—are limited. The legal obligations on the new towns are still not altogether clear from the Committee proceedings. Indeed, the debate that we had on the subject of whether the right to sell was determined by a new town corporation's own judgment ended with my asking, admittedly, a most detailed syntactical or contextual question of the Minister of State, which he declined to answer absolutely. He said that it was not for him on that occasion but was for lawyers on another occasion. I do not blame the Minister of State for making that point. It was properly prudent.
However, when we next debate the new towns in this House, whether it is on the Local Government, Planning and Land (No. 2) Bill on Report or the special Report stage that the Minister promised us on the new Bill, which was clause


106, the Government owe it to the House to have a Law Officer of the Crown describing exactly what is the legal position—who can require or enforce sales and what the new town corporations' rights are in terms of selling or retaining their assets. I hope that the Minister will make it clear that we may have a categorical statement on that point.
As to the details about which I asked the Minister and to which I received no answers, the Opposition are taking legal advice. However, on these matters the authority of the Law Officers is what the country needs and deserves. I hope we may be told that all the unanswered questions about new town sales can be answered by a Law Officer before the points are debated on the Floor of the House.
I turn to my interpretation of why the Government have got themselves into this mess. I do not refer to any of the other problems they may have caused themselves over the Local Government, Planning and Land (No. 2) Bill, although this particular difficulty is related to them. One reason is the failure of the Government's sales policy. However, at one of the local authority associations this morning I was offered another reason why the Government are in this predicament, which also runs true. I hope that the Government will deny this categorically if it is untrue. That association believes that the Government are in no undue haste to get the Local Government, Planning and Land (No. 2) Bill on the statute book because they have not the slightest idea of how they will implement their block grant proposals and are still touting them around the country. [HON. MEMBERS: " Rubbish."]
I hope that the Minister of State will tell me whether the Association of Metropolitan Authorities has been asked again for more advice about how the block grant proposals can be implemented. My information, which can be denied or confirmed according to the Minister's whim, is that the Government are still asking for advice on how the block grant proposals can be implemented. Some of the details have yet to be worked out.
If the Association of Metropolitan Authorities is completely wrong, the Minister of State had better fulfil his

promise and produce the formula about how the block grant will work, which he assured the Committee would be published the moment he had worked it out. I am afraid he cannot have it both ways. If he can work it out, he owes it to the Committee to fulfil his promise and publish. If he does not, we must assume, as he is a man of honour, that he cannot work it out. [Interruption.] If the Minister of State can think of a third possibility, he will be doing much better in the House than he has been doing in the Committee.
My own judgment is the ALA's judgment—that there is a desire to prolong the Bill until these details are completed, to prevent the Government facing the embarrassment of having to say that they have a principle of distributing the rate support grant but not a practice, because the situation is very clear to those of us who do business in the Committee. About a fortnight ago the Government decided that they were not going to have the Bill by mid-September. The progress that we are making in the Committee, which is the product of the reasonableness of my right hon and hon. Friends, makes it very clear that if the Government wanted the Bill in its entirety, clause 106 and all, they could have it by 14 September.
My suspicion is that we shall be out of Committee at or shortly after the spring bank holiday. I do not know how long their Lordships are likely to take on the Bill. I do not know for certain how much time the Report stage is likely to be allocated. By any reasonable calculation, however, this Bill should be on the statute book by the summer. Yet here we are making provision for something that will happen in the middle of September.
I end as I began by saying that to justify the position and to convince the House the Minister of State had better start again and tell us exactly why he is doing what he is doing tonight.

Mr. King: With the leave of the House, I will reply to the points raised.
May I say, to clear up any misunderstanding, that I understand the points which the hon. Members for Greenwich (Mr Barnett) and Harlow (Mr. Newens) raised about the possibility of having a Bill now, with a Second Reading, and a


completely separate procedure. It is, unfortunately, not possible to introduce a separate new towns money Bill and that is why we are following this procedure, because the rule is that provisions substantially the same as one which has had a Second Reading may not be proceeded with during the same Session. It is therefore necessary to follow this procedure.
I understand the point that the hon. Member for Harlow made about the perhaps somewhat narrower confines of the Report stage and Third Reading, but I have far too much respect for his parliamentary experience to believe that he will not find perfectly adequate opportunities to deploy any of the points he wishes to make, as he and his right hon. and hon. Friends did tonight. In what is a very narrow procedural debate, we have been into all the questions about block grant, we have been exploring some of the intricacies of the legal niceties of the requirements on certain development corporations, which I suppose in the narrowest interpretation might have been thought to be just possibly close to the bounds of order. But the ingenuity of the right hon. and hon. Gentlemen triumphed over all that perfectly, within the bounds of order. I am sure that, when we come to Report, the hon. Gentleman will demonstrate his skills if he wishes to do so yet again in that respect.
There is not a tremendously sinister further implication in this. I anticipated, because I am getting to know the right hon. Member for Birmingham, Spark-brook (Mr. Hattersley) and certain hon. Gentlemen here, that we would be accused yet again of—that favourite word—sinister motives in this respect. There are no sinister motives and it is nothing to do with the question whether there has been any difference in the views about the recycling or sale of assets. The hon. Member for Harlow has told the House and the Committee the truth. The sum of £150 million will have to be paid whatever happens as interest on the loan, and when that falls due the borrowing limit will be exceeded. That is the situation that we face.
May I say to the hon. Gentleman without trespassing over the bounds of order that the issue of small businesses men was discussed in Committee. It is encouraging to see the way in which consortiums of small business men are

coming in and have actually purchased properties in this respect and in Stevenage.
I listened carefully to what the right hon. Member for Sparkbrook said about the legal aspects. I answered those questions extremely fully in Committee, to my total satisfaction, but I will write to the right hon. Gentleman before Report, as he requested, to ensure that he has a full explanation of our views.
There is no question of the Government's seeking to delay the Bill. It is an excellent Bill which we wish to see carried on to the statute book at the earliest opportunity. We are anxious that there should be full and proper debate, as the Opposition know full well, and we have co-operated in every way.
Their Lordships also have a full programme of work and, in case there was a risk, we thought it prudent to ensure that the new towns were protected from the danger of lapsing accidentally into the spill-over Session for the main Bill. That is why we have brought this instruction before the House.
In the discussions yesterday with the Association of Metropolitan Authorities we reiterated our previous suggestions about our interest in any safeguarding amendments the association might wish to put forward. We believe in consultation. We have made clear to the associations that we wish to develop the new formula and the new system of block grant, in consultation. The suggestion that we are looking around for ideas on how it can possibly work is a gross distortion. While I am used to such suggestions being made in Committee, I did not imagine that the right hon. Gentleman would make them on the Floor of the House. It must be the lateness of the hour that caused him to indulge himself in that way.
I am grateful to the House for the understanding it has shown and for its general agreement on the importance of ensuring that the position of new towns is in no way damaged.
I hope that the House will approve the instruction.

Question put and agreed to.

Ordered,
That it be an Instruction to Standing Committee D, That they have power to divide the Local Government, Planning and Land (No. 2) Bill into two Bills, the first consisting of clause


106 and a title and a citation and extent clause relating thereto, and the second consisting of the remainder of the Bill; that any proceedings on the second Bill may stand postponed until after the consideration of the first Bill; and that either Bill may be reported to the House as soon as it has been considered.

IRAN (TEMPORARY POWERS) BILL

Ordered,
That, in respect of the Iran (Temporary Powers) Bill, notices of Amendments, new Clauses and new Schedules to be moved in Committee may be accepted by the Clerks at the Table before the Bill has been read a second time.—[Mr. Boscawen.]

CANVEY ISLAND (INDUSTRIAL INSTALLATIONS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen]

Sir Bernard Braine: I make no apology for drawing attention once again to the dangers that my 34,000 constituents in Canvey Island face from the largest concentration of liquefied gas, chemical and oil storage installations in the country. No one who has read the Health and Safety Executive's report on the subject, which was published in June 1978, can be left in any doubt about the unique web of risk in which my constituents are enmeshed. One cannot fail to grasp not only that each specific risk is dangerous enough in itself but that it is made more so by the proximity to others.
Indeed, after all the improvements in safety proposed by the Health and Safety Executive in its report have been implemented—and that will take some years—the level of risk will still be unacceptable. The report estimates that one-third of the total risk comes from one installation—the British Gas methane terminal. It imports 12,000 tonnes of liquefied natural gas each week. It is stored in four huge, below-ground earth pits and six above-ground insulated tanks which are far too close to people's homes for health or comfort. The terminal is licensed to hold 110,000 tonnes of LNG, although at the end of last year the amount involved was about 55,000 tonnes.
When natural gas is cooled to the immensely cold temperature of minus

162 degrees centigrade, its volume is reduced 600 times. Put another way, one LNG tank contains as much energy as 600 similar size tanks filled with normal natural gas. Liquefaction is certainly a convenient and economical way of transporting and storing natural gas, but because of the immense concentration of energy each weekly tanker arriving at Canvey is equal in energy terms to six Nagasaki-type atomic bombs—and that is attended by grave danger.
If an LNG tanker became involved in a serious collision in the Thames estuary while discharging its cargo at the terminal jetty, or if there were a sudden rupture of one of the above-ground storage tanks leading to a major spillage, the liquid released would quickly vaporise, mix with air and form a cloud which would become highly flammable. As the cloud would be heavier than air, it would cling to the ground. Since our prevailing winds are south-westerly, it would sweep towards a densely populated area where sources of ignition abound.
As the Comptroller-General reported to the United States Congress in July 1978, following an exhaustive inquiry into the safety of liquefied gases,
 a major spill in a densely populated area, whether by accident, natural forces, or sabotage, could be catastrophic.
The HSE knows that that can happen at Canvey. It has admitted that once a major spillage takes place nothing can be done to prevent the formation of a gas cloud and its inevitable ignition.
Oddly enough, in spite of our experience at Canvey in the last 15 years—experience of the collision of ships with liquefied gas cargoes, ships colliding with jetties, rupturing pipelines, and accidents at the methane terminal—only in the last few days have we learnt that experiments are to take place to establish the behaviour of large quantities of liquefied gas when released accidentally. Shell has announced a series of tests on Maplin sands during the summer. One object is to ascertain whether, on ignition, a gas cloud will explode or merely burn.
Shell has a commercial interest in the matter. It is involved in the development of a large gas-processing plant and tanker terminal at Moss Morran in Fife. It is anxious to reassure objectors to its plans.


The interest of my constituents is very different. It matters not at all to people threatened with a disaster whether they will be blown to smithereens or merely incinerated. What they are entitled to know, and what I hope they will be told, is the justification for allowing such a major hazard as that at Canvey to continue in operation so dangerously close to their homes and to the schools that their children attend.
I must ask my hon. and learned Friend the Minister whether it is intended to monitor the Shell tests independently, by the HSE. If not, why not? Are the results to be made known to the local authorities and to the general public? If so, how soon after the tests are completed? I agree that anything that adds to our knowledge of the behaviour of liquefied gases is to be welcomed.
The report to the United States Congress on the safety of liquefied gases which I have already quoted said only two years ago:
 Risk assessment studies have not reached a stage where their conclusions can be relied on. Until they do, regulators will have to attempt to make timely, prudent, siting and other critical judgments with the realisation that many important safety questions cannot yet be answered with confidence.
That is still the position in this country today. It is no wonder that the report concluded that future facilities for storing large quantities of these gases should be built in remote areas.
I emphasise that the fact that the Shell tests are now to take place shows just how neglected has been the whole question of handling LNG close to populated areas. There is, however, one ray of hope. I have the impression that the Government are now alert to the problem. Indeed, in recent months Ministers—including my hon. and learned Friend—have shown more genuine interest in the subject than have any of their predecessors. I am glad to put it on record that my right hon. Friend the Secretary of State for Employment invited me to bring my own scientific advisers to a meeting with him, my hon. and learned Friend and the HSE to discuss the whole question of Canvey safety. We met on 3 December. It seems that our arguments, especially about the risks associated with LNG, impressed my right hon. Friend because he agreed to our discussions continuing at official level.
For the first time ever, the Government

acknowledge that we face a serious and worrying problem and seem anxious to find a genuine solution. Moreover, British Gas itself seems to be waking up to the fact that its activities on Canvey have to be reduced. Early in March it announced that it was preparing to decommission the four in-ground earthen storage pits. That was good news.
Then, suddenly, events took a new and alarming turn. A constituent who was an electrical engineer at the terminal from September 1978 until August last year came to see me with an astonishing story. He told me that on taking up his appointment he found that there had been no qualified electrical engineer at the terminal for at least nine to ten months. There were no proper handover, very few technical documents and no record at all of electrical interconnections. His preliminary investigation revealed serious defects in electrical equipment and safety systems. Standby electricity generators were not working. Most serious of all, he found evidence suggesting that the internal safety and alarm systems in the six above-ground tanks were defective. He reported all that to the terminal management.
I should perhaps explain that these safety and alarm systems would give warning of overfilling of the tanks with liquefied gas, which might cause tank rupture, spillage and the formation of the dreaded gas cloud. Hon. Members will readily appreciate that failure in any part of a multiple alarm and safety system is serious because the strength of the whole is that of the weakest link. Even the most junior safety officer employed in industry knows that.
It was not until last summer that my informant was able to inspect these systems. In one tank which had been emptied for the first time in 10 years, he found that his suspicions were justified. One system, a high-level auditory alarm, was defective and would not have worked. He was unable to inspect the second system, a high-level trip, which would have shut off the inflow of gas in the event of the tank being overfilled. British Gas says that this was checked by another member of its staff. Despite my informant's doubts as to safety, the tank was refilled with gas.
As all these tanks are inspected internally only once every 10 years, there were grounds for thinking, so my informant


told me, that the back-up safety systems were defective in all of them. I have seen his report to the management, and there is little doubt that chances were taken with safety. He resigned shortly afterwards.
My informant reported the matter to the HSE before coming to see me. Inspectors swooped on the terminal on 6 February and confirmed that the high-level alarms were not working and that the high-level trips, while said to be operable, were unreliable. I must pay a tribute to the HSE. Once it had the information, it moved with the most commendable speed. It set out its requirements to British Gas in writing. The director-general told me later:
 From the commencement of the investigation, intense pressure was being applied to British Gas".
By 6 March, the HSE was of the opinion that it had achieved a substantial risk reduction. A new alarm system had been installed. A fully qualified electrical engineer from a professional agency was engaged on 17 March. On 25 April the HSE served three enforcement notices on this great national monopoly. The first was to take immediate effect and required that the levels of liquid in the above-ground tanks should be reduced. The second requires that an additional system should be installed by 31 July. The third requires additional safety devices, independent of others in service, of a standard of reliability recommended in the HSE report to be installed by 1 May 1981.
I must tell my hon. and learned Friend the Minister that I am uneasy about that third requirement. That means that we are obliged to wait on trust and that recommendations made by the HSE, originally in June 1978, will not be implemented until three years later. I say that that is far too long. If British Gas cannot meet that requirement now or by the summer, the terminal should be closed down.
I shall give my reasons for saying that. Let us consider for a moment what these developments mean. Clearly, there has been an appalling neglect of elementary safety precautions in a plant which the HSE rates as a " major hazard ". It will be recalled that the court of inquiry into the Flixborough disaster found that at that time an inadequate bypass system

was installed to keep the plant in production. Just at the time when that was done—and I quote from the report:
 The key post of Works Engineer was vacant and none of the senior personnel of the company, who were chemical engineers, were capable of recognising the existence of what is in essence a simple engineering problem let alone solving it. 
There was a direct connection between this absence of professional expertise and the events which led to the complete destruction of the nypro plant and the deaths of 28 people. In my opinion, it was disgraceful that a major gas installation, where the back-up safety systems are electrically activated and where the numbers of people at risk beyond the plant are far greater than at Flixborough, should not have had any qualified electrical engineer in post on the site before September 1978 or for some months after August 1979. It was only after the HSE investigation had established defects in the electrically-operated safety systems that steps were taken to appoint such a suitable qualified man.
There is a savage irony in all this. When the HSE, acting with the best of intentions, advised the Castle Point district council in the autumn of 1978 not to allow any new planning permissions within a radius of 1 kilometre of the terminal—thus serving notice on 8,000 people that they lived in an area where there was some danger—the management of the terminal was taking chances with safety within the plant itself. It had learnt nothing at all from the Flixborough disaster.
Indeed, British Gas at the highest level has learnt nothing either, for when the facts about the terminal were out in the open its spokesman told millions of viewers, in a Thames Television programme on 10 April, that at no time had fewer than three types of alarm operated satisfactorily on each tank. That was a lie, and British Gas knew that it was a lie because the HSE had discovered otherwise two months earlier.
For full measure, the same spokesman said that over a period of 15 years no incident involving risk to safety had taken place at the terminal. That too, was a lie. I have since reminded the chairman of British Gas of a number of incidents any one of which might have triggered off a disaster.
I mention this because the improvements which have been enforced by the HSE have to be seen against a background of incompetence at the local level, cover-up at the national level and deliberate lies and distortions over a matter which touches on the safety of a large community. There is no confidence in my constituency of Essex, South-East that British Gas should be allowed to continue operating a major hazard installation so close to a large residential population. Already the local authority has demanded that the terminal be closed down, and a very heavy responsibility rests upon those who say otherwise.
My hon. and learned Friend will doubtless remind me of the decision already taken to decommission the massive in-ground storage of LNG at Canvey—an operation which will be fraught with some difficulty because the surrounding soil of the four huge earthen pits is saturated with gas.
But, as matters stand, the chairman of British Gas tells me that he has no intention of decommissioning the above-ground tanks. I submit to my hon. and learned Friend that the issue is no longer one which can safely be left to British Gas to decide. It is utterly wrong to ask my constituents to accept the present level of risk or wait a further year for one of the three enforcement notices to be fully implemented.
I beg my hon. and learned Friend to indicate, at the very least, that the Government will consider whether this major hazard should be permitted to continue its operation at Canvey. I am asking him to give hope to my constituents that the dangers to which they have been exposed for far too long will be removed as quickly as possible.

The Under-Secretary of State for Employment (Mr. Patrick Mayhew): I am glad that my hon. Friend the Member for Essex, South-East (Sir B. Braine) has been successful in his application to discuss this subject on the motion for the Adjournment of the House. It is a matter of extreme importance to his constituents whose interests on this, and indeed on all other matters, he has so long and so faithfully represented. It is also a matter which concerns the constituents of my hon. Friend the Member

for Maldon (Mr. Wakeham), who is in his place tonight. Of course it is a matter of the greatest concern for the Government, who have the overall responsibility for operating and enforcing the Health and Safety at Work etc. Act through the agency of the Health and Safety Commission and Executive.
I am grateful to my hon. Friend for what he has said about the scrutiny that the Government are giving to the conclusions drawn in the Canvey report of the HSE in 1978 in consultation with his own scientific advisers. I am also grateful for the tribute that he has generously paid to the HSE for the swift way in which it took action this year when new information, to which he has referred, became available regarding the reliability of the safety devices fitted to the six above-ground tanks for the storage of liquid natural gas operated by the British Gas Corporation at Canvey.
My hon. Friend has been kind enough to keep me informed of and closely acquainted with the representations that he has made both to the chairman of the British Gas Corporation and to the director general of the HSE in the light of this important new information. As my hon. Friend has told the House, it came to light from a former employee—an electrical engineer employed at the site—and I am grateful for it.
It was made known to the area director of the HSE, Mr. Peter Yeomans, on 1 February of this year that there were serious deficiencies in the systems designed to guard against over-filling of the above-ground tanks, in particular in electrical equipment and electrically-activated safety systems. In consequence, two principal inspectors of factories visited the terminal at once.
I should mention at this stage that because over-filling a tank with liquid natural gas can lead to an escape of that gas, with the possible rupture of the tank and the formation of what must be a highly dangerous cloud of gas, each tank is fitted with four separate devices designed to indicate in different ways whether over-filling has occurred. That is a measure of the precautions that are needed.
However, the design safeguards consist of, first, one high level alarm: secondly, a high level trip, which cuts off the inflow


of the gas if the level get too high; thirdly, a tell-tale escape valve; and, fourthly, a level indicator sited in the control room. Of these, only the first two can properly be classed as alarms. On inspection, it was found that, among other deficiencies, on five of the six tanks the high level alarm was not operating. There was no indication of how long that state of affairs had pertained.
As regards the high level trips, which cut off the inflow of gas, these, though not known to have failed on any occasion, cannot, I am advised, be tested short of opening up a tank, or deliberately over-filling a tank—which is a highly undesirable procedure. They are considered to be of unreliable design themselves.
Furthermore, on inspection of British Gas's internal records, it was apparent that the regular internal examination of one of these tanks was six months overdue. The HSE immediately sought assurances from British Gas that these and other matters would be rectified. It also asked the date of the expected appointment of a resident electrical engineer. None had been resident for the previous five months.. By 6 March new high level alarms had been fitted on all six tanks, replacing the defective alarms.
Discussions with British Gas on further precautions considered by the HSE to be necessary to guard against over-filling of the tanks continued, but British Gas failed to give unqualified agreement to these requirements, and accordingly, as my hon. Friend has mentioned, three enforcement notices were served upon the corporation on 25 April.
I think that it is worth mentioning the details of those. The first is an immediate prohibition notice, with which British Gas has complied. It requires that during filling operations safety margins are increased by setting lower maximum levels for filling and by more frequent level readings. The second notice, which is a deferred prohibition notice, requires that by 31 July this year British Gas must install a continuous recorder as part of its control room monitoring equipment together with additional high level, high reliability alarms which can be fitted or removed without taking any of the vessels out of service.
The third notice, an improvement notice, requires, as my hon. Friend has mentioned, that by 1 May next year independently operated level indicators should be installed on each tank with each system operated on a different physical principle, with at least one capable of being tested and maintained without the need for the tank to be taken out of service. In addition, an automatic high level alarm with automatic cut-off for the tank feeds should be installed, independent of the two-level measurement system and capable of frequent proof testing.
British Gas has indicated that it does not propose to appeal against these orders, either as to their substance or as to the time limits for complying with the last two. These orders provide for important additional safeguards. In relation to the point that my hon. Friend makes about the delay in compliance with the third until May of next year, I would simply say that the first prohibition order for immediate compliance makes significant reductions in the maximum levels for filling and adds very considerably to the frequency of the required tests for checking the level as filling takes place. These are additional safeguards of a significant and important nature which have to be complied with straight away.
I have noted the trenchant criticisms that my hon. Friend has made about the management of the methane terminal. Criticisms of management control were expressed to British Gas on the occasion of his visit by the area director of the Health and Safety Executive in April. Changes in management have been instituted by British Gas. However, I am advised that it cannot be right to claim, as a representative of British Gas did, I understand, on ITV, that at no time have fewer than three types of alarm operated satisfactorily on each tank. Accordingly, I give an assurance to my hon. Friend that the executive itself will be monitoring closely both management control and the work required by the enforcement notices, and additionally all other aspects of safety at the methane terminal.
The information that came to light has been of great value. Taken together with the improvements already required by the Canvey report, most of which have been carried out or commenced, the further improvements at the LNG tanks that are specified in the improvement notices will,


in the view of the executive, mean that the chances of the accidental formation of a gas cloud will be very remote.
The recommendations of the Canvey report took account of the likely behaviour of such a methane gas cloud if it came to be formed. The executive has some knowledge of what may happen in the unlikely event of a large release of methane. I concede that its knowledge is far from complete. It is for that reason that the report was cast deliberately on a pessimistic view. Accordingly, we welcome the series of tests that Shell proposes to carry out on Maplin sands this summer.
The executive will be represented at the tests. I give a further assurance to my hon. Friend that its own observations and conclusions drawn during the tests will be made available to my hon. Friend and to all other interested parties at the earliest opportunity.
My hon. Friend asks the executive and the Government to go further and to close down the methane terminal at least until there has been compliance with the orders. I can assure my hon. Friend that I shall give the most careful consideration to his remarks. I am aware of the proper anxieties of his constituents, as is the executive. The readiness of the executive

to protect his constituents' interests in accordance with the health and safety at work legislation has been demonstrated by the speed with which it has moved. However, it is not its duty under that legislation to ensure that no possible risk exists. Its duty is to judge when enough has been done to minimise the chances of a major incident which would cause injury. It is a heavy responsibility, but it is one that must be discharged.
The advice that the executive gives the Government is that enough will have been done, in its judgment, provided that the restrictions and the improvements specified in the orders that it has served are implemented. It will closely monitor that implementation. If at any time the executive believes that a temporary or a permanent shutdown of the above-ground LNG tanks, or the methane terminal as a whole, is necessary in all the circumstances, it will require it. I hope that what I have said in response to my hon. Friend's valuable speech, which was based on the valuable information made available to him and to the executive, will serve to reassure both him and his constituents.

Question put and agreed to.

Adjourned accordingly at twenty-five minutes to Twelve o'clock.